AIM provides many valuable benefits for listed companies. When a company joins, it generates cash, raises the company profile and provides a way of incentivising staff with share options.
Background to AIM
The Alternative Investment Market (AIM) was set up in 1995 to encourage investment in start-ups and smaller companies. There is much less red tape involved in getting listed on AIM, so it is considerably quicker and less costly to get on than the main London market. It has now become the most popular way to float, with almost 400 companies joining up in 2005 alone. This comes as little surprise as AIM has collectively raised £17 billion for its members in its first decade. It offers the capital-raising benefits of a public flotation combined with a flexible regulatory approach.
Listing on AIM provides generous tax breaks. Shareholders in an AIM-listed company only need to pay Capital Gains Tax of 10 per cent, rather than the usual 40%. AIM holdings are also free from inheritance tax. In recent times bigger companies have been attracted to AIM because of these advantages. The largest of these is Sportingbet, currently valued at £1 billion. In just a decade the average size of AIM companies has doubled and there are now more than 60 companies quoted on AIM with a market value over £100 million. Companies with several hundred millions of capital should consider an AIM flotation, rather than a full market listing.
When to float
There isn’t really a hard and fast rule about when to float. You need to speak to a nominated advisor (NOMAD) who specialises in helping companies float on AIM. These Financial Services Authority regulated professionals are commercial in their own right with a vested interest in getting clients through the regulatory process with as little drama as possible. They will assess whether there are likely to be enough people out there who are going to want to invest in your company.
How to start
The first step is to appoint a NOMAD and a broker. You will also need a lawyer and an accountant. This will be your team of professional advisors.
Choose a NOMAD who is experienced in raising the amount of money you need to raise. You should also go for someone who’s helped other companies in your sector before. The London Stock Exchange website www.londonstockexchange.com has a list of NOMADs but the best way to find an advisor is to get a recommendation from someone who’s had a good experience.
How long will it take and how much will it cost?
The process will take between three and six months.
Listing costs vary depending on your circumstances and a NOMAD will be able to tell you more. That said you should be thinking of paying at least £250,000 plus commission on the money raised.