Scottish businesses well placed for AIM listing, says expert

Out-Law News | 20 Sep 2016 | 3:00 pm | 2 min. read

Businesses operating in the life sciences, technology and food and drink sectors in Scotland are well placed to become listed as public companies on London's Alternative Investment Market (AIM), an expert has said.

Corporate finance specialist Rosalie Chadwick of Pinsent Masons, the law firm behind Out-Law.com, made the comments after a conference in Edinburgh looked at reasons why there has been a lack of appetite in Scotland for an AIM listing.

Marcus Stuttard, the London Stock Exchange’s (LSE's) head of AIM, told delegates at the AIM21 conference that businesses based in regions of the UK outside of London feature strongly on the AIM but that companies in Scotland were less likely to move towards a public listing. Pinsent Masons co-sponsored the AIM21 event along with the LSE, Informatics Ventures, Grant Thornton and Talent Spark.

"Craneware, iomart and SMS 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," said Chadwick, a speaker at the AIM21 conference.

"Dundee has reinvented itself as a centre of excellence in cutting edge life sciences and computer games and boasts any number of companies that could benefit from an AIM listing, while the Scottish food and drink industry, a traditionally strong performer, is starting to show more interest in the IPO (initial public offering) space than it has for a long time," she said.

Typically, companies thinking of an AIM listing will have a market capital of between £10 million and £100m on listing and look to raise, on average, between £5m and £50m. Since the AIM market was launched in 1995, more than 3,600 UK and international companies have joined AIM, raising £92 billion through new and further issues, contributing around £25 billion to the UK economy each year.

Chadwick said that there are signs that more businesses in Scotland will move towards a public listing soon, moving away from trade sales or injections of private equity (PE) funding which have been the preferred exit strategies for many business owners in Scotland.

"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," Chadwick said.

"Some companies may find a reverse take-over into an existing 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," she said.

Businesses that are considering an AIM listing should undertake due diligence in preparation so as to "preserve the value" of their company, Chadwick said. The steps taken can benefit businesses even if they decide not to move towards a listing, she said.

"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," Chadwick said.

"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," she said.