Firms encouraged to go public
Food and drink firms ‘eyeing AIM floats’
Rosalie Chadwick (pictured), told a gathering in Edinburgh that thriving businesses in the life sciences, digital, and food and drink sectors were well placed to seek an initial public offering (flotation).
This was most likely via the Alternative Investment Market, the London Stock Exchanges’s junior trading platform.
Speaking at the AIM21 Summit, Ms Chadwick, partner and head of corporate finance at legal firm Pinsent Masons, said: “Craneware, Iomart and Smart Metering Systems are excellent examples of how IT/digital enterprises can thrive after an AIM listing and Scotland is alive at the moment with start-ups and SMEs which could go on to imitate their success.”
She said Dundee has reinvented itself as a centre of excellence in “cutting edge” life sciences and computer games and has a number of companies that could benefit from an AIM admission.
She said the Scottish food and drink industry is “showing more interest in the IPO space than it has for a long time.”
Marcus Stuttard, the head of AIM, noted a long-held resistance to market flotations among Scottish companies.
He told delegates there are 24 Scottish companies on AIM compared to 37 in the Midlands, 66 in Yorkshire, 81 in the North West, 105 in South East, while London boasts just under 300. In the last four years there have been only three AIM flotations by Scottish registered companies.
Typically, companies thinking of an AIM listing will have a market capital of £10-£100 million on listing and on average be looking to raise £5-£50m.
Since AIM was launched in 1995, more than 3,600 UK and international companies have joined, raising £92 billion through new and further issues, and contributing around £25bn to the UK economy each year.
The lack of appetite in Scotland for an AIM admission has traditionally been a preference to seek bank lending and support from family and friends. Scotland’s remoteness from the City has also been a factor. Unlike their counterparts in London, small company owners in London simply do not have regular contact with the main players, either through work or socially.
However, this could be about to change, according to Ms Chadwick, who added: “Certainly, brokers I speak to are optimistic that the year-end will bring a spike in companies heading towards an IPO, and now we are past the summer lull, activity will ramp up as businesses put their houses in order in preparation for potential listings in Q1-Q2 2017.
“Some companies may find a reverse takeover into an existed listed vehicle is a more prudent and less expensive way of approaching the market, where a listing is achieved but not necessarily a fund raising, which simplifies and shortens the process of going to market.”
Businesses thinking of an AIM listing could do much to help themselves in preparation, said Chadwick: “The best advice I would give to those companies is to have a forensic look ‘under the bonnet’ to identify weakness within the business and put lots of effort in to resolving those issues so they don’t impact on valuation at the time of an IPO or shortly thereafter.
“This kind of good house-keeping also preserves the value of a company, regardless of whether it actually does go for a trade sale, PE or IPO route, and there are good examples of companies being acquired at healthy valuations immediately before going to market, because investors and trade buyers appreciate this is the optimum time when a company will be in the best financial and operational shape possible.”
AIM21 was co-sponsored by the London Stock Exchange, Informatics Ventures, Grant Thornton, Talent Spark and Pinsent Masons.
Keynote speaker and Scottish Enterprise chairman Bob Keiller was joined by Scotland’s Economy Secretary Keith Brown, who presented to an audience of entrepreneurs, angel investors and professional advisers at Edinburgh’s Roxburghe Hotel.