How to float on AIM
Floating on AIM used to be significantly cheaper than the main LSE in terms of commissions and fees, though regulatory tightening has reduced the difference. Most participants say the overall bill works out at between six and seven per cent of the amount raised, with fixed fees adding up to around £400,000 for advisers, lawyers and accountants, even if you raise no new money at all.
Define your goals
Before floating, it is important to clarify what you hope to achieve. Ged Mason, chief executive of Manchester-based technical staff recruitment specialist Morson, is clear about why he took the company to AIM this spring, raising £36 million at 160p at a cost in fees and commissions of around £2 million. Barclays Private Equity had a 55 per cent stake and wanted an exit. A £54 million buyout, funded by debt and family money, achieved this but left Mason and his family laden with debt.
‘We did not want to exit through a trade sale,’ he explains. ‘But we wanted to de-gear and be able to bid for other companies using shares and to crystallise value for management.’
Property man Farouk Sheikh, executive chairman of Potters Bar-based specialist care home group CareTech, says he also wanted to ‘empower and motivate’ key staff when he floated the family-controlled company on AIM last autumn with an £11 million placing at 160p. The funding, which Sheikh says cost between six and seven per cent of the sum raised, cleared the company of debt and will help it fund future acquisitions.
Unlike Mason, he has no intention of diluting the family stake by doing this with shares. He argues there’s no need to, ‘as there’s so much money around.’
Richard Warr, executive chairman of biotech hopeful ImmuPharma, which joined AIM with a £2 million fundraising, says the company ‘consumes cash’ in developing a potential treatment for an as-yet incurable illness. ‘We will go on needing cash up to the point where we can get a collaborator.’
To that end, the company needed not only the cash raised on AIM, but also the credibility inspired by a forward-looking working capital statement signed by its nominated adviser, Dawnay Day. ‘AIM is a tremendous place to list,’ enthuses Warr, a financier by background, who prefers it to being ‘gouged’ by a venture capital group.
‘Many companies have raised money privately with venture capitalists. But they always want to take lots of your company from you and there is always in-fighting over pricing.’
Stuart Barker, finance director of London-based Asian gaming and lottery operator Betex, would heartily agree. Previous dealings elsewhere with private equity and venture capital groups had been ‘unbelievably painful’, as they almost sought to ‘micro-manage’. AIM provided a ‘more structured and better programmed’ route to raising £13.6 million, before £1.1 million fees and commissions, for Betex’s planned development.
Oilman Mike Garland also wants AIM to tide over his US-backed company, Dominion Petroleum, with £33 million, as it looks for oil and gas in Tanzania. US hedge funds have put money in, but, he insists, London, whose overall fees and commissions are likely to be around £2 million, is the Mecca for funding: ‘London understands oil and gas and it understands Africa.’
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