aim Getting the AIM right
Tim Davis, senior adviser at Cantor Fitzgerald Europe, London, shares his insights with growing, private companies considering a public listing (IPO) on The London Stock Exchange’s AIM market
Now in its 22nd year, AIM has been a resounding success, with over 3,000 companies having joined so far, raising collectively £99 billion in new and further capital. It’s not just for UK companies: 657 have been from overseas*.
AIM is designed for growth companies and has its own universe of professional investors and specialist advisers that support it.
So what makes an ideal AIM company? The answer is simple: there are no preconceptions; the market is open to companies of all sectors, sizes and stages of development (even start-ups), from pre-revenue through to mature.
In return, investors want companies with compelling growth stories that require fresh capital to facilitate organic growth and/or acquisitions.
Any capital raising may include a sale of existing shares, typically, but not always, on behalf of people retiring, or earlier stage investors such as private equity, wanting to exit.
It is also highly likely that the company will raise additional funding post-IPO, as it executes its strategy, with the listed shares providing a ‘currency’ for additional new capital and to fund acquisitions. On AIM, this is comparatively straightforward and a strong attraction for constituents.
Investment typically comes from a wide range of institutional investors that may be larger pension funds, specialist growth or AIM-specific funds, tax-efficient funds (EIS, IHT & VCT), or private-client wealth-management groups.
Admission and accompanying fundraising is often a trigger for employees to invest directly in their company’s equity. Equally, one of the commonly-cited reasons for companies seeking to IPO is to make share options more ‘real’ and to provide an immediate market for the shares.
Upon admission, there are no minimum requirements for turnover, free float (of shares) or market capitalisation. Three years’ of audited accounts are however required, or as available since incorporation of the business, if sooner. Predictably, though, investors will gravitate more towards opportunities with, ideally, track records of two or three years, even if still relatively early stage.
The company must also confirm that it has adequate financial reporting procedures in place; and that, upon admission, has adequate working capital for at least 12 months’ post-IPO.
A company must retain a nominated adviser (NOMAD)
Cantor Fitzgerald is one of the sponsors of this month’s AIM Breakfast Seminar, Funding Growth in Challenging Times, organised by The Business Magazine. See opposite page for details.
To explore whether AIM may be right for you and your company, contact Tim Davis:
020 7894 8042
tdavis@cantor.com
at all times. Typically, the NOMAD will also provide full stockbroking support, both in raising funding and, through a variety of mechanisms, in continuing to promote the company thereafter to existing and potential investors. Another key role is for it to manage the company’s shares within the stockmarket itself; typically the broker will lead the market in buying, selling and trading the company’s shares.
Post-IPO, the company and broker will work together according to an agreed programme. Formal reporting is twice-yearly, with relevant news published between times, but always with a view to remaining visible and re- confirming delivery on strategy.
So far, so straightforward. But what sort of businesses are investors really looking for? In short, compelling, stand-out propositions with growth potential, run by able people to whom they can relate. They also have a marked preference for shares that are ‘liquid’ in the market.
The company must have an original, or timely, product or service that is scalable, with any IP protected and with clear routes to market(s). The requirement for capital must be clear, with easy-to-understand payback benefits and timings.
Investors will also look for a reassuring board line-up, with key skills and responsibilities represented: chairman, CEO, CFO and, dependent upon the nature of the business, CTO or CCO/Sales. Scrutiny will also be applied to the non- executive directors (usually a minimum of two) that will be appointed, particularly in terms of how they will use their own experience and skills to help broaden the base of the business into new markets etc.
Two other considerations for investors will be the risk profile of the investment and valuation. Attitudes to risk vary, whereas valuation is easier to explain: investors will usually pay a fair price for a decent business. They may even pay a premium for something perceived as very special. But they will not over pay, or buy any old opportunity.
*Source: LSE AIM Statistics Sept 2016
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businessmag.co.uk
THE BUSINESS MAGAZINE – THAMES VALLEY – NOVEMBER 2016
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