AIM-quoted NetScientific (LON NSCI) is acquiring the operating business of early-stage investor Martlet Capital, and its subsidiary EMV Capital will take over the management of Martlet Capital’s £23.3m portfolio of investments.
Cambridge-based Martlet Capital currently has 53 investments in its portfolio. NetScientific and EMV Capital invested in the company when it raised its initial investment in 2021 and have a 1.38% stake, while advisory clients hold a further 8.2%. These stakes assume conversion of convertible loan notes.
This means that NetScientific already has significant knowledge about Martlet Capital and its operations. The funds under management will provide a significant uplift on the EMV Capital funds under management of £26.1m at the end of June 2023.
There are plans to issue the Martlet Capital Fund II, which is based on the existing early-stage investment policy, and the Martlet Growth Fund for follow-on and later stage investments. This will further boost funds under management. The agreement is for four years.
NetScientific also believes that the deal will provide further access to attractive early-stage deals in the Cambridge area.
The initial payment for the business transfer is £2. NetScientific will pay 10% of any net carried interest it receives in respect of investments made by an institutional investor in new funds within two years of completion and 20% of net carried interest from investments in the Martlet Capital Fund II over the same time period. It will also pay 20% of net carried interest in investments made by the growth fund in companies in the Martlet portfolio.
The Martlet Capital operations have been losing money but there will be cost savings and annual management fees should offset the continuing expenses. Annual management fees from the portfolios taken on should be in mid-high six figures.
This deal should provide further income to cover group overheads so that cash is conserved with payments made after NetScientific has received the income.
