Pictured above: Richard Baker
Smaller AIM companies could increasingly fall victim to
takeovers, according to Richard Baker, a partner at the Midlands
office of national audit, tax and advisory firm Crowe Clark
Whitehill.
His comments follow a Crowe Clark Whitehill sponsored survey
into the likely levels of acquisition and disposal activity both
for constituent AIM companies and for potential buyers or strategic
investors.
The survey found that the combination of low earnings multiples,
the number of small companies and on-going compliance costs meant
that for some, particularly those operating predominantly in the
UK, the choices were stark - acquire, be acquired or de-list.
Most vulnerable were the 247 companies valued at less than
£5 million.
Mr Baker said: "A major issue that can put a brake on potential
M&A activity on AIM is that of the compliance and regulatory
costs for those companies subject to the Takeover Code and, where
private equity investors or acquirers may be involved, the inherent
uncertainty of a public offer.
"One mitigating factor is that in many smaller AIM companies the
founder shareholders still retain actual or de facto control of the
board and therefore any potential financial or strategic investor
should have some level of comfort that once an offer is made it
will not be frustrated or trumped by third parties.
"It appears the medium term prospects for AIM will see most new
entrants coming from businesses with a strong overseas element
whereas in regards to M&A transactions, considerable merger and
consolidation activity will take place within UK companies."
There were 217 M&A transactions on AIM in 2010 worth
£1.29 billion, with the most active sectors being general
financial, software and computer services.
UK companies account for only 35 per cent of AIM's
capitalisation but 76 per cent of deal value.
AIM has become by far the most successful capital market in the
world for emerging companies.
For more information about Crowe Clark Whitehill, please visit
their website here: www.croweclarkwhitehill.co.uk