AIM helps small firms cash in



Over £5.9bn has been raised for companies on the Alternative Investment Market (AIM), a part of the London Stock Exchange, since its launch in 1995....



Over £5.9bn has been raised for companies on the Alternative Investment Market (AIM), a part of the London Stock Exchange, since its launch in 1995. Currently more than 500 companies are listed on AIM, including many in the IT sector and some non-IT firms have used AIM to finance e-commerce strategies.

The market was set up for smaller and growing companies, seeking a listing for their shares. AIM meets the needs of early-stage and smaller but more established businesses from high and lower technology sectors.

Although AIM is not as visible in the IT and software world as TechMark (part of the main market), AIM is now well established in these sectors and IT/software companies represent one of the largest sectors by value in this market.

There are many benefits of an AIM listing, raising finance being a prime factor. Smith & Williamson has brought 18 companies to AIM, raising a total of £36m on admission and more than £60m in total. In particular, AIM enables companies to raise further funds relatively easily. For example, a business we brought to AIM in 1999, raised a further £1.4m to make an acquisition two months later.

The public profile of a company, so important when seeking investors, can be dramatically raised through listing on AIM, not only through the admission process, but on an on-going basis.

Additionally, the shares of an AIM-listed company should find a ready market, which can prove useful for principal shareholders and also for employees involved in the firm's share schemes. For companies considering acquisitions, offering quoted AIM shares can provide an alternative to cash.

Finally, the alternative market has a more flexible regulatory environment than the main market and can provide a stepping stone for smaller companies ultimately seeking a listing on the main market.

Are there disadvantages? Obviously, a share price varies and if there are problems, share price can suffer.

There is also the expense of joining AIM. A company with turnover of say £12m, wishing to raise £3m on admission, may face costs of £250,000 to £350,000, al-though these costs would be factored into the financing on admission. The chief danger is an abortive situation, which should be considered in advance and abort fees agreed.

Any AIM admission requires careful planning. Ideally, it should coincide with rising company performance and, hopefully, a buoyant market. The past 18 months have been busy for AIM, although it is calmer now, and the market remains receptive.

Further information is available from Simon Morris, a corporate finance partner at Smith & Williamson. Via E-mail or telephone 0207-637 5377

Always take professional advice before applying the contents of this article

Pros and cons of using AIM

Benefits

  • Helps to raise funds

  • Useful in improving profile, especially with investors

  • Facilitates raising secondary funds

  • Provides ready market for shares and exit for staff in firm's share schemes

  • AIM market rules are more relaxed than main stock market

    Disadvantages

  • Volatility of stock market

  • Expense

  • More stringent reporting rules than non-listed companies.

  • Read more on Business applications

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