US cash seeks ambitious AIM companies

‘We find that some companies, once they have listed on AIM, become aim-less,’ quips Paul Strzelecki, partner at Yorkville Advisers and head of the US firm’s recently opened UK office.

His point is that small-cap companies with big ambitions are finding it hard to secure post-IPO finance, especially in the current climate where debt is scarce and depressed valuations make issuing shares unattractive.

Yorkville’s solution is unusual. Rather than directly issuing debt or buying equity, it sets up a facility of an agreed size for its clients. Those clients then draw down money as they need it to support acquisitions or expansion, but instead of accumulating debt, they effectively sell shares at the current market price to pay for what they use.

The firm, which is backed by a non-leveraged US$1 billion (£512 million) fund, has done deals with a handful of UK-listed companies already, including AIM-quoted serviced office provider Your Space and Cyprus-based mining company EMED on the Main Market.

‘We’re not interested in steady-state businesses or distressed situations,’ explains Strzelecki, a former vice-president of Motorola. ‘Our model is focused on growth – either late-stage private or small- to mid-cap quoted companies.’

Cheaper cash?
Yorkville’s model has an obvious advantage if your share price is increasing: the money you draw down will be cheaper as time goes on. Of course, if your share price plummets the reverse will be true, meaning there’s an element of risk involved.

‘We are not looking for a sharp deal with nothing to follow it; we’re looking for companies with real growth capability,’ says Strzelecki, adding that he is in talks with several businesses which are seeking finance for opportunistic acquisitions.

The firm describes itself as being midway between private equity and a hedge fund. It will never acquire a stake of more than a few per cent in any company (so as not to disrupt trading) and it will offer what it describes as ‘light-touch’ strategic advice from a team with both entrepreneurial experience and corporate connections. Its usual investment period is around two years.

Strzelecki describes himself as a ‘supporter of British business’, and is a Manchester United fan to boot. ‘We want to turn more UK businesses into billion-dollar businesses,’ he concludes.