AS INTEREST rates rise, the Alternative Investment Market (AIM) is becoming an increasingly attractive option for raising money - which means the country's dealmakers are set to end the year with a flurry of activity as firms investigate a listing.
An AIM listing is now viewed as a relatively quick and straightforward way to access new funding for a company to expand and make acquisitions, or to provide an exit route to venture capital financiers. Other advantages include raising a company's pr
ofile, increasing its credibility, and facilitating long-term growth.
Despite a recent report showing that only 26 of the 1,600 companies listed on AIM are based north of the Border, most corporate finance teams in Scotland have a number of potential AIM listings on their books.
Stewart MacDonald, head of corporate finance at accountants Scott- Moncrieff, says he is talking to at least two firms looking to list on AIM next spring. He is a firm believer in AIM, having guided Lee's Food Group - which makes Scotland's renowned macaroon bars and snowballs - to the market last year.
"Lee's Food Group's listing on AIM has had a high profile and, as a result of that publicity, more businesses are coming forward and showing interest in a similar flotation. One of the businesses that we are currently advising was prompted to go for an AIM float as a direct result of Lees' success. I expect to see AIM become increasingly popular over the next year as the benefits become wider known.
"One of the main advantages is to give ambitious companies better access to funding, as and when it is required, to pursue growth by acquisition - rather than organically, which can sometimes be too slow for an aspirational management."
Kenneth Rose, a partner in the corporate finance team at Dundas & Wilson agrees: "Scotland has a good track record in terms of the companies that have floated on AIM and that success breeds more interest in it. We have half a dozen ambitious companies looking at potential listings, but timing and preparation is vital."
Rose says he expects activity to focus on technology firms - operating in IT services and biotech - and the renewable energy sector. He also predicts a number of oil and gas services and private sector deals emerging. "AIM is ideal for fast-growing companies that are essentially too small to interest the main market.
"It must also be remembered that AIM can be used strategically, as an attractive way of putting a company in the shop window for an eventual takeover."
Bryan Johnston, director at Bell Lawrie, expects a big jump in AIM activity as interest rates rise. "More Scottish companies than ever are looking to AIM as a way of coming to the market.
"This will rise even further as interest rates rise - which results in an increase in working capital costs - as then equity markets become even more attractive.
"I expect AIM to be a much energised sector of the markets as it offers an excellent platform for companies to raise money. It is also cheaper and less restrictive than going for a full listing."
David Leslie, head of corporate finance at PricewaterhouseCoopers, is keen to see a higher representation of Scots companies on AIM. "I hear lots of discussion about pursuing an AIM listing, but the truth is that there have not been that many Scottish companies who have done it.
"When I meet a client seeking to raise money or sell equity capital, AIM is one of the items on the shopping list. I am expecting to see more AIM deals in the pipeline, but each case must be measured against the shareholders' objectives and also the alternatives, which include private equity, bank funding and a trade sale."
CASE
STUDY
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ation on AIM nets major gain
SCOTTISH five-a-side football pitch operator Goals Soccer Centres has scored a major victory for the Alternative Investment Market (AIM) by becoming one of its biggest success stories.
The East Kilbride-based firm made its stock market debut with a flotation on AIM in December 2004, and has produced record-breaking profits ever since.
Last month, the firm issued interim results which showed that pre-tax profits nearly doubled to £2.1 million in the first half of 2006, up from £1.2m the previous year.
Goals also confirmed ambitious expansion plans to increase the number of soccer centres it operates within the next two years.
The rapid growth of the business has resulted in shares soaring from the flotation price of 62p to about 265p, valuing the business at £111m.
Goals decided to float on AIM to access funding to accelerate its growth. The firm operates 21 purpose-built venues across the UK, with three in Scotland. Since the flotation it has opened ten new centres, including five this year. A minimum of six more are planned by the end of 2007. Keith Rogers, managing director, said
he was "delighted" with the success of the move onto AIM. "We found the process very straightforward. We had a very focused strategy and we were well-received by the City, which resulted in our shares being over-subscribed five and a half times. Being on AIM has also raised the profile of the business substantially.
"I would recommend taking the AIM route to other Scots firms in a similar position we were in. The good news is that if you have a good business proposition, then the markets will support you."
The full article contains 931 words and appears in The Scotsman newspaper.
