Aim market boosted by flurry of deals

“The increase in M&A shows that Aim works.”

Dealmaking on the UK’s Alternative Investment Market (Aim) rose sharply in 2016 with 34 companies listed on it being snapped up, a fifth more than the 28 taken over in 2015.

Research from Hacker Young suggests the number of Aim takeovers shows the junior stock market is “playing its role” as an incubator of valuable firms, but warned more still needs to be done to promote the market to investors.

The final quarter of 2016 brought a “particularly sharp” rise in M&A activity – 13 Aim firms were acquired, up from the eight bought in the same period in 2015.

Unsurprisingly, the rise in deals was largely driven by the depreciation of sterling following the Brexit vote – 70 per cent of the bids for Aim companies in Q4 came from overseas firms.

“The increase in takeovers of Aim companies shows the junior stock market is playing its role as an incubator of valuable companies,” Hacker Young said in a statement. But it’s warning that the rise in M&A activity also accelerating the overall reduction in the number of companies listed on the junior market.

105 companies cancelled their Aim listing in 2016 which, after taking into account companies joining Aim, equates to a net loss of 61 companies from AIM in 2016. Of the 105 companies leaving Aim in 2016, 46 companies left Aim either because of financial stress or because of a failure of strategy.

There are now 993 companies listed on Aim, down from the 2007 peak of 1,694. Laurence Sacker, managing partner for Hacker Young’s London and Nottingham offices, said a tightening of market requirements in 2006 and the economic environment from 2007 onwards has caused a reduction in the number of underperforming companies on the market.

“The continued shrinkage of Aim is not great, and if this continues at the present rate then the future of the market may be in doubt. There does need to be a lot more of an effort to market Aim to UK and international companies,” Mr Sacker said.

“It’s vital that Aim appears welcoming to all companies looking to raise capital- particularly to foreign companies, as after Brexit there may now be a perception that London is not the place to be.

“Cutting costs associated with listing or increasing Aim’s outreach programme could make a big difference in the number of companies choosing to list on the market.

“Instead of listing on a junior market such as Aim, private equity and venture capital firms are increasingly seen as the preferred choice for companies looking to raise capital- particularly for start-ups.
“The increase in M&A shows that Aim works.”

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