HomeArticles»Why more of our firms should take AIM at equity funding
Why more of our firms should take AIM at equity funding
Posted on Wednesday 23 March 2011 byUlster Business
Mark Fahy, AIM, Marcus Stuttard, Head of AIM and Neasa Quigley, Partner, Carson McDowell.
More of Northern Ireland's high growth companies should consider the benefits of flotation as the next step in their evolution, according to the Head of the London Stock Exchange's Alternative Investment Market (AIM).
Speaking to Ulster Business while in Belfast to take part in a round table event for venture capitalists hosted by law firm Carson McDowell, Marcus Stuttard said the access to equity capital provided by AIM could play a big part in the growth of locally-based companies, and the wider economy.
"This is the right time to be promoting capital raising on the public markets as a good form of finance. We know there is an opportunity and that there should be more companies on market," he said.
AIM, the LSE's international market for smaller growing companies, was launched 15 years ago and since then has helped over 3,200 companies raise more than £73bn through initial listings and further fundraising. There are almost 1,200 companies listed on AIM with a market value of almost £80bn. However, only three are Northern Irish companies - First Derivatives, Assetco Plc and Andor Technology.
Stuttard puts that down to a combination of easy access to debt in the past, the cost associated with flotation, a lack of understanding on the advantages, and business people not wanting to give away ownership of their companies.
"There is work we need to do in terms of educating company founders and entrepreneurs. There have historically been some control issues, but I think equity has become an increasingly attractive form of finance. Debt finance in the past might have been put before equity but for a lot of companies it is not an option any more," he explained.
The AIM chief said there are good emerging companies in Northern Ireland, particularly around the technology and clean-tech sectors, for which raising capital on the public markets would provide credibility for further growth.
"We often find companies are able to secure major contracts once they are on the market they simply weren't able to secure before. It demonstrates that a company has got scale and has been through the regulatory procedures. But critically once they are on market they are committed to making information available and are transparent and open. That gives employees, clients and banks confidence," he said.
While Stuttard agrees that equity finance is not right for all businesses, he believes a vibrant public market like AIM enhances the overall funding chain by giving VCs and business angels confidence to invest, safe in the knowledge there is an exit market. He also thinks fewer firms would be sold off in trade sales before reaching their true potential or value if they were AIM listed and could access equity finance to get scale, develop technology or employ more people.
Last year a study by Grant Thornton, commissioned by the London Stock Exchange, found that companies on the AIM growth market contributed £21bn to UK GDP in 2009 both directly and indirectly. AIM companies directly contribute £12bn to GDP and employed 250,000 people. A further £9bn of GDP and 320,000 jobs are supported indirectly through supply chain and multiplier effects.
"Even while conditions for IPOs globally have been subdued over the last two years, one of the things that has shone through about AIM is that the companies on market have been able to raise further rounds of finance. In incredibly tough market conditions in 2009, £5.5bn was raised, 90% of which was through further issues. Last year £7bn was raised. Bearing in mind that this is a small companies market, that level of funding is really incredible," said Stuttard.
He thinks the figures illustrate the strength of AIM's market and the community supporting it - including brokers, accountancy firms, law firms and analysts - and notes there are good advisers in Northern Ireland such as Carson McDowell that can help local firms access the capital markets.
"We spend a lot of time talking to institutions and investors generally, and there actually hasn't been a point at which investors have turned around and said 'we haven't got the money'. It is there, but it is about confidence. I think companies do need to demonstrate that they have a good management team, that they have a good business, and if they can get that story across money is definitely available," he added.
"We are now starting to see a move back to investors wanting to support new businesses and IPOS. In the last six months of last year we saw an increase in the amount of money going into IPOs compared to further issues. The fact that money has been available through the last three years shows not just that investors have got money, but that they have confidence in the AIM regulatory model."