AIM v Private Equity for growing firms

THE biggest concern for companies considering floating on the Alternative Investment Market (AIM) are the initial cost, “short-termism” and regulation, delegates at a specialist seminar said.

Yorkshire companies looking to expand attended the specialist seminar looking at the benefits of getting funding via AIM and private equity.

Accountancy firm Baker Tilly hosted the AIM v Private Equity event at the Royal Armouries which brought together key players from both arenas to discuss the merits.

A survey of the delegates at the event found that of those interested in AIM, they ranked exposure to investors, acquisition currency and share options schemes as the most important issues.

However the biggest concerns about an AIM float were the initial cost, “short-termism” and regulation.

Of those considering private equity as a route to growth, the most important issues were retained control and availability of funds. The biggest concerns about raising private equity funds were loss of control, pressure to achieve results and the exit strategy.

The event heard from Tom Vosa, Yorkshire Bank's chief economist, who told the audience: “You can read about the downturn in the newspapers but we are yet to see it in the figures. We are expecting a 5% fall in house prices across the UK this year. I can't emphasise it enough – we are actually doing OK.”

That positive note was echoed by the speakers on private equity, including Rob Donaldson, head of M&A and private equity at Baker Tilly, who said: “Deals are still being done. We have seen five deals in the last eight weeks.”

Peter Armitage of Leeds-based private equity fund Key Capital Partners, said that private equity had had such a bad press over the last few months that his children had started telling their friends that their dad was an estate agent.

Mr Armitage pointed out that £500bn had been invested in UK companies by private equity firms between 2000 and 2005. “You can buy almost any UK company now – Boots was bought by private equity and Sainsbury's was a target,” he said.

Mr Armitage said that his firm was involved in several current deals and he was proud of the fact that he had helped make more than 25 millionaires during his 20 years in the private equity arena with firms such as Apax and YFM.

Dave Forrester, the chief executive of Sheffield-based 3D computer graphics business VSI told the audience about his firm's £4m MBO in 2006 which was backed by London-based private equity house Matrix. He said that he had learned a great deal and his firm was in better shape thanks to Matrix's backing.

Meanwhile Chilton Taylor, head of capital markets for Baker Tilly and the only accountant invited to join the AIM Advisory Group of the London StockExchange, said that AIM-listed companies are “sexy, acquisitive and have a story to tell”.

“£56bn has been raised since the launch of AIM with an average market capitalisation of £54m. There were 50 new entrants in 2007,” he said.

Joanne Lake, director corporate finance at Evolution Securities in Leeds, acts as a nominated adviser to companies seeking to list and those already listed on AIM.

She highlighted the pros and cons of listing on AIM and gave tips on how to maximise its effectiveness.

The real-life experience of running a listed company came from Bob Woods, chairman of Leicestershire-based pension adviser Mattioli Woods.

He said that the firm, which he and his business partner Ian Mattioli started in a garage, floated in 2005 to allow them to offer a stake in the business to the talented young team they had put together.

Since its float the business has made four acquisitions and seen its share price rise from 132p to 290p today.

TheBusinessDesk.com was the media partner for the event.