AIM’s reach extends beyond the United Kingdom, serving as the listing venue for over 590 companies operating in over 70 countries around the world primarily within Asia Pacific, the Americas and Europe.

  

London’s standing as a global financial centre is unquestioned, rivaling, and in many respects surpassing, its competitors in the United States, the Far East and Europe.

 

Its recognition of multiple accounting standards (notably US Generally Accepted Accounting Principles) can be a major inducement for companies headquartered in the United States and other countries that are not fully compliant with International Accounting Standards (IAS).

 

Historically, the City of London’s focus on the Commonwealth and United States and its prominence in major global industries (notably mining and extraction) have created a wide array of non-UK companies for institutional investors to support

 

While continuing to support these traditional markets, London is expanding its footprint in new geographies and industries. The BRIC countries (Brazil, Russia, India and China) are becoming increasingly well represented. London financial institutions are also extending coverage to new sectors such as property and closed-end investment vehicles, renewable energy and other “green” industries.

 

AIM has succeeded in listing more international companies than its competitors combined. When examining its pre-eminent position, a number of factors make AIM highly attractive to growth companies seeking expansion capital.

 

AIM listings are often less costly and time-consuming than comparable listings on NASDAQ, GEM, and other public markets, streamlining the Initial Public Offering (IPO) process for growth-oriented companies. It has proved itself to be a resilient market during previous economic downturns which indicates its ability to weather the current turmoil in global financial markets.

A recent report estimates that for a $50 million company the typical costs of listing on AIM are between $1-1.5 million lower than a comparable listing on NASDAQ and the ongoing costs of an AIM listing are one-third those of a NASDAQ listing. The timeframe for listing on the GEM market in Hong Kong can often be as long as 12 months compared with the typical 3-4 months on AIM.

 

A significant contributor to this efficiency is the unique ‘principles-based’ regulatory system whereby all AIM listed companies require a Nominated Adviser (or Nomad),

both during the IPO process but also on an ongoing basis post IPO. The Nomad acts as an authorised adviser, appointed by the London Stock Exchange (LSE), and is responsible for assessing the suitability of the company to be listed and its ongoing compliance with the AIM Rules for Companies.

 

The Nomad focuses on Corporate Governance (in which the UK is recognised as a global leader) and internal controls as part of its due diligence processes, working closely with the reporting accountants to ensure that these areas are addressed pre and post flotation.

 

AIM’s rules are less prescriptive and more principles-based, affording a degree of flexibility that suits typical growth companies.

 

AIM companies are generally not required to produce a full prospectus to European Union directive standards or to show a track-record (although if one is available, three years are required to be reported). AIM requires shareholder approval for only the largest of deals and in contrast to the quarterly reporting standard of competitor markets,

AIM allows half-yearly reporting and thus enables enterprise managers to concentrate on building their businesses.

 

The secondary fundraising market in AIM is unsurpassed. Of £16.2 billion raised on AIM in 2007, £9.6 billion was raised in secondary placings. The institutional nature of investors and the increasing global reach (£5.6 billion raised in 2007 was from non-UK investors) means that companies with demonstrated success are often able to return to investors and seek follow-on capital investment for further growth. While not unique to AIM, many of its competitors do not provide such access to secondary investment and are therefore less interesting to fast growth entrepreneurial companies.

 

In addition, the English-speaking nature of the UK and AIM companies’ low failure rate (an average rate of just three percent over the last four years) make the London market highly attractive to businesses around the globe.

  

Despite its past success and attractions, AIM is not immune to recent adverse shifts in global market conditions that have damaged already listed companies and significantly reduced the number of new listings.

 

AIM has weathered volatile market conditions in the past. The boom and bust of the dotcom bubble in the late 1990’s sent shockwaves through a number of capital markets around the world. Arguably AIM emerged from that downturn in better shape than other growth markets, with a solid platform upon which to grow rapidly in the early and mid-2000’s.

 

The recent economic slowdown combined with the increasing maturity of the global capital market has meant that investors are increasingly focusing on slightly larger, more liquid companies as the range of investment opportunities has grown. The average funds raised at IPO are now higher than they were historically (£33.5 million in 2006 compared with £4.6 million in 2001) and companies are having to offer something new to stand out from their competitors, both during the listing process and once listed. Significantly, more companies are also seeking pre-IPO funding to bridge the gap as companies wait until they are further developed before listing.

 

In short, the investor community remains very committed to AIM amid the global economic downturn. But the recent financial turmoil has heightened investors’ sensitivity to risk, underscoring the importance of quality and preparation for companies approaching new AIM listings.

 

Directors must work with their financial and legal advisers and seek their guidance on such listings, especially in advance of discussions with potential Nomads and brokers.

  

It is likely that the entry of new growth markets will erode AIM’s competitive position in coming years. In addition to Hong Kong’s GEM and Singapore’s Catalist, NYSE Euronext, PLUS in the UK and the new Deutsche Bourse Entry Standard offer alternatives to AIM.

 

AIM will continue to offer important opportunities to entrepreneurial businesses seeking growth capital. It is a market that delivers equity from informed institutional investors both within and outside the UK, who have a proven record of follow-on funding and supporting their investments over a number of years.

 

AIM’s regulatory environment, international focus, and impressive track record will continue to attract quality companies from all around the world in a variety of industries. Well-prepared companies seeking growth capital can find a potential home on AIM.

 

To read the full report you can download it here.