Downturn hits AIM
ACTIVITY in the Alternative Investment Market (AIM) has hit its lowest level in three years, new figures have revealed.
Roger Esler, corporate finance partner in the Leeds office of Deloitte, said: “The worst of the downturn was expected to hit AIM in the second half of 2007, but a flow of IPOs in the pipeline propped up the overall numbers.”
Deloitte’s quarterly analysis for 2008 to date, however, show that activity has dried up with a 40% drop in new fundraising from £2.8bn in the first quarter of 2007 to £1.1bn for the same period this year.
January was the lowest month since 2004 with only £27m of funds raised, the business advisory firm said.
Less than 10% of funds raised this year have been from new IPOs – the first time that this figure has been below £1bn since the first quarter of 2005.
Mr Esler said the statistics conveyed some more subtle messages for Yorkshire plcs.
He said: “There are marked disparities in valuations emerging as money flows into the largest plcs where perceived risk is lower and liquidity higher.
“This makes smaller companies vulnerable to predators and it is not a time for management teams to sit on their hands. Plcs should be taking advantage of reduced private equity activity in the deal market and making acquisitions, where they have balance sheet capacity.
“Additionally, being sufficiently prepared to defend or optimise any bid approach, or even to take the business private, are routes that might warrant consideration and advice.”
However, the research found that despite the economic downturn hitting fundings, there is still a steady flow of listings on AIM. Of the 32 companies that were admitted to AIM in the quarter, half were transactions that involved no fundraising at all.
Mr Esler said the increase in secondary fundraising levels is a growing trend. During 2007, AIM saw secondary fundraisings outstrip those from new IPOs by 45% as maturing AIM companies with demonstrably successful results came back to the market for additional funds.
