Start AIMing high

Since opening in 1995, around 2,200 companies have been admitted to the Alternative Investment Market (AIM) and more than £24bn has been raised.

Specifically tailored to growing businesses, giving companies from all countries and sectors access to the public markets at an earlier stage of their development, AIM combines the benefits of a public quotation with a more flexible regulatory approach.

Why float?

The following reasons are often cited as why a company may decide to seek an AIM listing: l A requirement for capital funding to take a business to the next stage of its development l For rapidly growing companies, a public listing provides a paper currency for future acquisitions l A public listing can give a better profile with customers and suppliers and allow the negotiation of improved trading terms l A listing may provide a means to motivate employees and allow them to feel more involved in the future of the business l A float can enable a company to gain external investment without surrendering control to a competitor and may even sometimes unlock more value than a sale.

Ordinarily though, a float should not be seen as a means of achieving an exit the institutions that buy shares in companies quoted on AIM will be keen to see key shareholders having a continuing involvement with, and exposure to, the business.

It should be noted that management shareholders will usually be restricted (the lock-in') from selling any shares they retain in the company for between one and two years post-float.

Why not float?

A flotation is not for every company and any director looking to join AIM should ask themselves whether a public listing is the best way to achieve their company's long-term strategic objectives.

In addition: l The process is relatively expensive and time consuming three months is typical l A float can distract management from running the business and even be detrimental l Other funding/exit options are likely to be available and for this reason, the company's broker or corporate finance adviser will often run a two-stage process with discreet market testing being used to assess whether a trade sale, or float, is the preferred option l Listing on a public market exposes a board of directors to rigorous legal obligations and detailed public scrutiny and their company's share price will at least in part be subject to the vagaries of the market and any developments in the wider industry sector l Newsflow' and expectation management' are key to maintaining a buoyant market in a company's shares and this requires an onerous ongoing investor relations programme analysts' meetings, the production of research notes and ambitious market-led profit targets will test the most hardened finance director Is your company a suitable AIM candidate?

The person best placed to give a view on whether a company is in the right sector and has the characteristics needed to become a successful public company is a nominated adviser, known as a Nomad, who will confirm to the London Stock Exchange whether or not a company is suitable for admission. In assessing whether this is the case, the Nomad will look for: l A strong and experienced management team with a proven track record and healthy approach to corporate life l The likelihood of sustainable profit growth l A compelling story' defined by factors such as customer base, market share and the particular company's unique selling point l The likelihood of the company returning to the market for further growth funding.

The advisory team Floating on AIM involves four principal stages first, the appointing and instructing of advisers and setting of the timetable, preparation of the admission document or prospectus and review of likely diligence issues; Second, legal and financial due diligence and verification on the candidate business to ensure all problem areas are flushed out and any relevant issues and risk factors drawn to the attention of investors.

Then there is marketing, where management have to sell' their company to prospective investors and analysts.

Finally, there is execution, where the company's shares are priced, the placing agreement containing warranties and indemnities in favour of the broker is signed up to, the admission document sent to investors and the company's shares admitted to trading. While in many respects achieving an AIM float is a well established, document-led process, it is arduous.

It is therefore critical to involve the right advisers at the outset to ensure the process is efficiently managed.

The four steps to flotation: l Twelve weeks before float appoint and instruct advisers, agree the timetable and begin to prepare admission document and review key diligence issues l Six weeks before float carry out detailed legal and financial due diligence and verification exercises and finalise all documents l Two weeks before float host investor and analyst presentations l Final week before float approve the issue price, sign up legal documents, bulk print and circulate the admission document to investors n Contact: stephen.archibald@bllaw.co.uk; visit: www.bllaw.co.uk