How to float on AIM
Article Date: Sep 14 2006
Pre-float preparations
There are several crucial steps you must take before listing your company and courting investors.
1. Prepare yourself for the switch from private to public company. Even if you are only releasing a small minority of shares and will remain firmly in control, you must be ready to have your business crawled over by lawyers, accountants, bankers and brokers and to answer questions from them and the Press, as well as outside investors, not only during the float but ever afterwards.
You must learn discretion. You must not reveal ‘price-sensitive’ information to a few friends or make forecasts you cannot achieve.
2. You should ensure your board is as impressive as possible, which may mean recruiting a non-executive director with City credibility. Similarly, you need the most formidable advisory team you can muster.
3. You can only seek to float on AIM if you have a Nomad, usually a broking or financial group, which has been authorised by the AIM authorities. The Nomad must vet your own and your company’s suitability for AIM, check the claims made in your admission document and monitor your continuing suitability after you join.
4. You will also need a broker, whose commission is likely to be the largest single item of expense in the flotation process. Richard Warr at ImmuPharma says four to five per cent is ‘normal, though it can cost more’.
It is up to your broker to advise you on the timing and pricing of your float, which can cause grief and vexation. The broker must market your company’s shares for the float and also keep the stock market informed of relevant developments thereafter and maintain a continuing dialogue after flotation.
The same firm can act as both nominated adviser and broker to your company, but need not do so. Warr at ImmuPharma, which has Dawnay Day as Nomad and KBC Peel Hunt as broker, believes separation works better.
‘A Nomad should work for you like an old-fashioned merchant bank. But, if it is the same as your broker, you don’t have the same freedom.’
5. Before you can float on AIM, you must produce a detailed, long-form report, based partly on your business plan. This will detail your company’s history, structure, operations, corporate governance and past and expected trading results.
For this you will need a reporting accountant, whose responsibility will be to the Nomad. This accountant, distinct from your own auditor, will be involved in carrying out the ‘due diligence’, checking the statements and information in the report, a task which will also need the services of a lawyer.
This due diligence process can vary in complexity depending on the nature of your business. For Betex, with most of its business in China, the legal due diligence was ‘the biggest hurdle’, according to finance director Barker.
It was for Mariana Resources, too, an unlisted Australian company with gold and silver prospects in South America, which raised £3.6 million on AIM in March. Chief executive John Sutcliffe recalls, ‘With our number and spread of properties, our domicile and our Australian shareholders, it was a complex business.’
6. As a public company, you will need to keep your shareholder list up to date for dividend payment and other purposes. For this you will need the services of a registrar.
The registrar can act as a useful conduit of information between you and your shareholders. This role can take on key importance if corporate manoeuvres, such as takeovers or mergers, are afoot.
You should also dedicate at least one, and possibly two, senior people to liaise with your advisers. An AIM float can take from two to five months and, cautions Richard Hildebrand of law firm Trowers & Hamlins, ‘You should not underestimate the amount of management time the flotation process will take up.’
7. Consider possible online aids to a float. All IPO Plc is one company boasting an online platform for bringing together issuers, investment banks and brokers with retail investors and venture capital groups.
Choosing your team
Selecting advisers is an inexact science. The lawyers and accountants who have worked for your private company may not be appropriate for the public company scene.
You will naturally want advisers with a good track record on AIM, who understand your business sector and with whom you can develop a good working relationship. A large firm clearly inspires confidence, but it must see you as important and not neglect you.
Research by Business XL’s sister magazine, Growth Company Investor, has identified the best-performing brokers and/or nominated advisers in terms of the money raised on bringing companies to on AIM between October 2000 and September 2005. Broker Seymour Pierce handled 96 AIM floats, more than any other broker, raising a total of £413 million. Collins Stewart handled fewer floats, 47, but raised the most, £1.7 billion, in the process. And in the first half of 2006, Collins Stewart leads the way among advisers and brokers, having already advised on 17 flotations, raising a total of £1.38 million.
Some brokers have particular strengths. Canaccord has handled a large share of resource company floats and the recently-formed Cenkos has been busy. Among accountants, Baker Tilly is particularly active on AIM, as is Smith & Williamson. Most larger firms have a presence and among the more active regionally is Grant Thornton.
Capita Registrars is Britain’s leading registrar in flotations on the LSE, AIM and the smaller OFEX/PLUS market. With more than half the new issues market and clients, representing more than 60 per cent of UK quoted companies, Capita, which provides a full range of shareholder communication services, is part of the £1.4 billion business process outsourcing specialist Capita Group.
One of Capita’s most recent innovations for quoted companies is its ‘Company Secretarial Services’ offering. The service is designed to take day-to-day pressure off finance directors by taking full responsibility for everything from note-taking at board meetings, Companies House filings and other crucial regulatory tasks.
Ged Mason from Morsons held a ‘beauty parade’ for broker and nominated adviser and chose Brewin Dolphin as both. ‘I liked the team they put forward,’ he explains, ‘and they have a big Manchester operation,’ while the lawyer Morson used had handled the company’s original management.
CareTech also chose Brewin Dolphin in a beauty parade. At ImmuPharma, Warr says he chose Dawnay Day as nominated adviser after being introduced to someone there whom he liked. For an accountant, he recalls picking Smith & Williamson. ‘It is important to match your size to your advisers.
For Betex, choosing the right lawyer was crucial, with much of its business under Chinese jurisdiction. Barker says the company was fortunate in finding Global Law, a firm spun out of the Chinese Government Legal Department and staffed with fluent English-speaking experts.
‘People either get recommended to Trowers & Hamlins,’ says Hildebrand, ‘or our local office recommends them to London.’ Lawyers will often recommend potential Nomads to their corporate clients.
