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Taking AIM with confidence

Friday 11 January 2013 5:00

There have been so many meetings with private firms recently regarding the benefits of flotation. This has been driven by the need to access long term finance and the continuing scarcity of debt funding. Mark Fahy explains.

AIM, London Stock Exchange’s growth market for SMEs, has seen an improving pipeline of good companies in 2012, particularly UK technology businesses.

One of the most positive things they have reported is that investor roadshows were not unduly difficult, with oversubscribed fund-raisings and high quality investors on the shareholder register.

The crisis in the Eurozone has clearly had an effect on the number of flotations, but we firmly believe all of the foundations are strong.

Within the UK, we have never had as many meetings with private companies as we’ve had this year regarding the benefits of flotation.

This has been driven by the need to access long term finance and the continuing scarcity of debt funding.

Utilitywise, an energy consultancy from South Shields, is the perfect example of a business that has accessed funding through the public markets and benefited as a result.

The management team opted to float on AIM in June 2012, raising £7m and valuing the company at £37m, a figure which has since risen more than 30% to over £50m.

This growth has, of course, benefited the company and its shareholders but also the local community through job and wealth creation.

The public markets also continue to be used as a critical, ongoing source of capital: investors who are convinced by the company’s performance and prospects are often willing to support it by buying into further share issues in the months and years after it has been admitted.

To date, companies on AIM have raised a total of £35bn in capital at admission and followed this with further fundraising amounting to £44bn.

This demonstrates the vital role AIM plays in supporting the growth strategies of firms throughout their life as public companies.

There are a number of other benefits which complement the primary capital-raising function; improved public profile, the ability to attract new customers and increased credibility for winning contracts are just some of the positive side-effects companies have experienced following a London flotation.

London Stock Exchange Group continues to lobby on behalf of SMEs to ensure the equity funding ladder works efficiently, and to make sure investors and companies can be brought together in the most effective way possible.

We had an active dialogue with the Government on changes to the Enterprise Investment Scheme and Venture Capital Trusts, and their extensions will mark an important step in making investment in SME companies even more attractive.

More recently we welcomed the Government’s announcement, as part of the Autumn Statement, that there will be a consultation on the inclusion of AIM shares in ISAs.

Also we continue to work hard to ensure our markets remain an environment which balances the needs of growing companies with investor confidence. AIM has become the world’s most successful growth market for SMEs as it is governed by a regulatory framework specifically tailored to the needs of the companies it serves.

Meanwhile, continued high levels of investment and liquidity show that investors have confidence in the marketplace. Deciding on an IPO is a very important decision and one which should be discussed at length, and considered carefully.

Life as a public company is not suited to all businesses, but the strength of the UK public markets and its financial community means there is an exceptional infrastructure to help a firm decide, and implement its strategy if it decides it should be the next step.

If you are an ambitious and growing company, AIM is an attractive route to a public quotation on one of the world’s most prestigious markets.

Mark Fahy is head of UK small and mid-cap companies – equity primary markets- at the London Stock Exchange.