Preheat the oven to 200C/180C Fan/Gas 6. Stuff the bay leaf and thyme sprig inside the grouse. Wrap the bird in the bacon and tie up with kitchen string. Season the grouse with salt and pepper.
Heat the oil in a frying pan. Sear the grouse for 2–2½ minutes on all sides in the hot pan. Add the butter to the pan and baste the bird for a few minutes or until lightly browned all over. Place the grouse in a roasting tin and roast in the oven for 10–15 minutes, or until rare or medium–rare. Cover with foil and leave to rest for at least 10 minutes. Remove the string.
For the mushrooms, place the mushrooms in a food processor and blitz to a purée. Heat the oil in a frying pan, add the puréed mushrooms and cook for 5 minutes, or until all of the water has evaporated. Season with salt and pepper.
For the liver, heat the butter in a frying pan and sauté the livers, garlic and thyme. Add the Madeira and sauté until the liver is just cooked through. Leave to rest on a plate then smash roughly with a fork to create a roughly textured purée.
For the toast, fry the sourdough in the butter until golden on both sides.
To serve, spread the liver on one slice of toast and the mushroom on the other and cut the bread slices in half. Serve with the grouse, watercress and bread sauce.