A balance of strengths, skills and experience: How to successfully float on AIM
5 min read
23 August 2018
If you want to successfully float on AIM, then you need a clear strategy and strong management team. These are all factors investors will be looking for, a report revealed.
Research from 2017 applauded the amount of capital being raised by businesses on AIM – a record £30 million worth of funding was seen despite a drop in admissions. Now, over 3,700 companies have listed on AIM since its creation, having raised over £104 billion in capital.
It’s no wonder then that small and mid-cap fund managers view it as a genuine alternative to the main market. But there is still confusion among UK business owners as to the benefits of an IPO – and how to make it a success.
Hoping to give guidance on the process, The Supper Club collated advice from its exclusive high-growth entrepreneurial members, as well as partners, to create the report Way to Grow.
Its author – and The Supper Club’s programme director – Alex Evans, unveiled some initial considerations: “A float is not recommended if you’re looking for an early exit. In addition to accessing huge pools of growth capital, founders float for longer-term investment that enables them to build the value of the company through new growth phases.
“It greatly enhances profile to build a global brand, which helps to attract clients, partners, suppliers and talent. It is also an opportunity to reward early supporters of the business.”
FinnCap’s head of corporate finance, Stuart Andrews, explained in the report that if you wanted to float on AIM, you needed a Nominated Advisor (NOMAD). It would be their role to guide you throughout the flotation process and undertake due diligence to ensure your company qualifies for AIM. They draft the AIM admission document as well.
“A NOMAD will look at the strength of your management team, which is an important part of IPO,” he said. “While recruiting a big-name chairman, NED or CEO can enhance your story and inspire confidence, remember that you and your senior team will need to impress as you will answer to several shareholders.”
Crafting a growth story is crucial, members said – and should always include a long-term vision.
They also stressed that IPO isn’t the cheapest of endeavours. The NOMAD you secured has to be paid and selected brokers gain 3.5%-5% of the money raised. There are also initial set up fees, so make sure you’re prepared before going the AIM route.
Having led several fundraisings, Andrews suggested IPO success came down to focussed management and a strong board.
“There has to be a balance of strengths, skills and experience, which comes across in the investor presentations,” Andrews said.
“An unimpressive and poorly-composed management team, even of an exciting business, may be enough of a red flag for investors not to participate in an IPO. Similarly, if the skills of the management team do not come across clearly, it may result in a failure to generate the interest that the business deserves.
“Also, the shareholders of a company looking to IPO must be aware that their own valuation expectations of the business will likely be quite different to the view of the stock market.
“Companies who come to market need to be very clear on not only their reasons for undertaking an IPO but also their future plans. Most importantly, they should provide a plan of how they will deploy any funds raised to ensure a high return on capital for investors.”
One of the most common reason IPOs fail, he stressed, is misreading of market timing and wider, macroeconomic factors. So research, research, research before making the leap.
There are several reasons companies go public. Sometimes it’s to raise capital, or to acquire more business. Curiosity about recent IPOs got the better of us. We asked bosses what made listing on AIM an attractive bet.