Could Scotland’s life sciences, IT and food and drink sectors lead the way to the stock market?
Scotland is lagging behind the rest of the UK in the number of companies represented on the Alternative Investment Market (AIM) it was claimed at last week’s AIM21 Summit in Edinburgh.
Marcus Stuttard, the London Stock Exchange’s head of AIM, told delegates that while regions out with London feature strongly on AIM, their Scottish counterparts seemed more reticent to head for a public listing.
There are only 24 Scottish based AIM listed companies compared to 37 in the Midlands, 66 in Yorkshire, 81 in the North West, 105 in South East, while London boasts just under 300, and in the last four years there have only been three AIM listings by Scottish registered companies.
However, fellow AIM21 speaker Rosalie Chadwick, said there was much to be encouraged about with many thriving businesses in the Scottish life sciences. IT and digital, and food and drink sectors well placed to go down the IPO (initial public offering) route.
Chadwick, partner and head of corporate finance at legal firm Pinsent Masons, said: “Craneware, iomart and SMS are excellent examples of how IT/digital enterprises can thrive after an AIM listing and Scotland is alive at the moment with start-ups and SMEs which could go on to imitate their success.
“Dundee, the City of Discovery, has reinvented itself as a centre of excellence in cutting edge life sciences and computer games and boasts any number of companies that could benefit from an AIM listing, while the Scottish food and drink industry, a traditionally strong performer, is starting to show more interest in the IPO space than it has for a long time.”
Typically, companies thinking of an AIM listing will have a market capital of £10-£100 million on listing and on average be looking to raise £5-£50 million. Since the AIM market was launched in 1995, more than 3,600 UK and international companies have joined AIM, raising £92 billion through new and further issues, and contributing around £25 billion to the UK economy each year.
According to those in-the-know, the lack of appetite in Scotland for an AIM listing could be due to a number of factors, including a traditionally healthy private equity (PE) presence north of the border, family owned businesses tend to be hesitant about IPOs, and until recently a trade sale or PE injection was the preferred model for an exit strategy.
However, that could be about to change according to Chadwick, who added: “Certainly, brokers I speak to are optimistic that the year-end will bring a spike in companies heading towards an IPO, and now we are past the summer lull, activity will ramp up as businesses put their houses in order in preparation for potential listings in Q1-Q2 2017.
“Some companies may find a reverse take-over into an existed listed vehicle is a more prudent and less expensive way of approaching the market, where a listing is achieved but not necessarily a fund raising, which simplifies and shortens the process of going to market.”
Businesses thinking of an AIM listing could do much to help themselves in preparation, said Chadwick: “The best advice I would give to those companies is to have a forensic look ‘under the bonnet’ to identify weakness within the business and put lots of effort in to resolving those issues so they don’t impact on valuation at the time of an IPO or shortly thereafter.
“This kind of good house-keeping also preserves the value of a company, regardless of whether it actually does go for a trade sale, PE or IPO route, and there are good examples of companies being acquired at healthy valuations immediately before going to market, because investors and trade buyers appreciate this is the optimum time when a company will be in the best financial and operational shape possible.”
AIM21 is co-sponsored by the London Stock Exchange, Informatics Ventures, Grant Thornton, Talent Spark and Pinsent Masons.
Keynote speaker and Scottish Enterprise chairman Bob Keiller was joined by Scotland’s Cabinet Secretary for Economy Keith Brown, who presented to an audience of entrepreneurs, angel investors and professional advisers at Edinburgh’s Roxburghe Hotel.