AIM: appetitie for acquisition will provide ample work for City lawyers


The Alternative Investment Market (AIM) has seen a huge boost in secondary fundraisings over the past year, research has revealed - while more than half of companies listed are planning to make an acquisition in the next 12 months.



Forecasters predicted ample work for City lawyers as the appetite for secondary fundraisings and mergers and acquisitions (M&A) work looks likely to remain strong.



A third of the 200 AIM companies polled by accountants Smith & Williamson said they planned to make an acquisition in the next year, while a fifth said they intended to do so in the next six months. Almost 30% said they would make an acquisition in

more than 12 months, but only 17% did not have any plans to do so.



The sums raised in secondary fundraisings outstripped the amount stemming from initial listings last year, for the first time since 1998. This trend looks set to continue, with £327 million raised in secondary fundraisings in January 2008, compared to just £27.2 million in initial listings.



Nick Davis, finance partner at City firm Memery Crystal, said there was a 'good appetite' for secondary fundraisings, particularly among the many mining exploration companies on AIM which have spent all the cash initially raised on entry to the market. He added that while there was still some ongoing IPO work, there has been a drop-off in new IPOs and he was 'not optimistic' that this would pick up.



Mr Davis added: 'AIM is traditionally made up of small, fast-growing companies and so it may be that there will be more M&A activity from AIM, because that is what these companies do.'



John Cowie, head of AIM at Smith & Williamson, said that while IPO documentation is the 'most lucrative' for lawyers, there are still significant fees to be made on secondary listings. He added: 'Companies are raising funds for a reason and go on to use it for acquisitions, which means their lawyers will be required again. This is good news for the legal advisory community.'



Mr Cowie added that while some AIM deals were taking longer to 'cross the finish line', very few had actually been shelved.



Twice as many AIM companies said they would consider stepping up to the main market compared to last year. One quarter of respondents said they were planning to do so in the next 12 months. Mr Cowie said this was a reflection of the increasing size of AIM companies and the fact that some very large companies had come to AIM recently because they did not have the trading record needed to meet listings rules on the main market.



Rachel Rothwell