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The Alternative Investment Market - flotation without tears

The first of a two part look at the Growth of AIM by Keith Hatchick (II)

For the company admission to the market has a number of almost tangible benefits - it creates a status and share value of its interest which can readily be ascertained and used by its financial advisers and a market for raising funding to help with expansion. It also gives shareholders some choice beyond retention of shares, but this may be dependent on requirements imposed by nomads or by the Model Code.

Possibly the most important decision a company wishing to apply AIM will make is its choice of advisers. The most prominent member of the team is the nomad (who if not also the nombro will be instrumental in its appointment).

The nomad's role is to act as a link to the LSE and police the issuer and its disclosures. Both the nomad and the issuer will have legal representation and in addition the issuer will also require a reporting accountant. The cost is only one of a number of factors to be considered in whom to appoint. Where companies are happy with their accountants and lawyers and they have appropriate experience it makes little sense moving to a more prestigious (and expensive) firm.

The work should not normally require teams of lawyers or accountants. The choice of nomad is more difficult since frequently an issuer may have little experience in this direction. Since in the run up to a float a lot of time is likely to be spent with advisers a sense of humour in addition to professional competence is helpful.

Equally important is the need for a nomad to make a realistic judgement on the value of the company and in conjunction with the nombro the likely success of any issue.

It is important that the nomad takes an active interest in the company after the float but such interest should not involve any interference in the day-to-day running of the company. There has been a tendency for nomads to tie down the issuer by requiring an over-involved legal agreement. An agreement is certainly needed but this should only really concern the normal public company issues relating to its listing.

In other areas it should be sufficient to limit its role of one of "advice, warning and encouragement". Too often the tendency has been for the nomad to virtually be placed in a role akin to a shadow directorship. This is inappropriate both to the company and its nomad and should he resisted.

It is important that advisers and the company itself do not underestimate the time and cost of bringing a company to the market and as part of any due diligence advisers should consider all options. It is clear from some of the companies that are already quoted and indeed those who have retired from this forum that AIM is not a universal remedy. Prudence and care from all professionals must dictate the company's agenda, timetable and decisions.

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