A guide to joining AIM Corporate Finance 1 Capital A Markets guide to joining AIM PRECISE. PROVEN. PERFORMANCE.
A guide to joining AIM There are a number of UK specialist markets designed to meet the different characteristics of private businesses looking to go public. The two principal markets are operated by the London Stock Exchange (LSE): Main Market The Main Market for larger and well established businesses AIM AIM for small and growing companies This guide provides an overview for companies considering a flotation on AIM. Companies typically join AIM: to raise capital; to raise profile with customers and suppliers; to facilitate M&A; to promote corporate strategy and facilitate acquisitions by using quoted shares as consideration instead of cash; to provide liquidity for the company s shares, broadening the shareholder base; to raise funds at future dates to continue growing the business; to get an objective market value of the business. We were pleased to work with Moore Stephens on the successful listing on AIM, the first dual listing of its kind. This listing will enable Global Invacom to access new sources of capital to help meet its international growth strategy, broaden its shareholder base, and enhance value for its current Singapore-based shareholders and the Moore Stephens team was an important part of the process to achieve this end goal. Matt Garner, CFO of Global Invacom A guide to joining AIM 1
Entry criteria The entry criteria for AIM is tailored to growing companies with, theoretically, no historic trading record required, no minimum size criteria and no prescribed level of shares required to be in public hands. Where the applicant is an investing company, a condition is that it raises in excess of 6 million in cash on admission. Admission process The AIM admission process requires significant senior management time and commitment. Considerable planning and documentation are essential to meet all of the AIM requirements and achieve a successful flotation. The AIM IPO process can be broken down into the following phases: Phase 1: Planning Phase 2: Due diligence Phase 3: Research Phase 4: Drafting Decision to proceed. Appoint listing advisers Financial, legal and commercial due diligence Prepare research note Admission document investor presentation verification Phase 5: Marketing Phase 6: Placing agreement Phase 7: Admission Marketing road show commences Placing Pricing dealings commence 2 A guide to joining AIM
Who needs to be involved? There are several phases to a successful flotation, all of which need the support of experienced corporate finance professionals. Nominated adviser (Nomad) Each company admitting to AIM must appoint and retain a Nomad to guide it through the admission process and advise it during its time as a public company. The Nomad is engaged by the company and acts as the link between the company and the LSE to determine whether or not the company is suitable for a listing on AIM. Once admitted, the Nomad will ensure the company complies with the AIM Rules, review and advise on the nature and form of regulatory announcements, and provide advice on business strategies and general market conditions. Broker Law firm to company Law firm to Nomad Nomad IPO company Reporting accountants Public relations firm Registrar Reporting accountants The role of the reporting accountant is different from that of the company s auditors, but can be fulfilled by a separate team in the same firm. Their principal function is to review the company s financial results and reporting processes, and report to the Nomad on any areas of concern. The reporting accountants are responsible for preparing a long form financial due diligence report, a short form accountant s report and a working capital report. As part of their work, they will also comment on the financial reporting systems and controls in place at the company. Law firm to the company Lawyers will carry out a legal due diligence review of the company to identify any issues that need to be remedied prior to admission to AIM. They are also responsible for verifying the content of the admission document, advising on the legal aspects of the admission, including re-registration as a public company, the general duties of directors of a public company, new service agreements, general disclosure requirements and the terms of any placing agreement. A guide to joining AIM 3
The directors of the company (as well as the company itself) must take responsibility for the contents of the admission document. Public relations firm The PR consultants will be engaged prior to IPO to help generate press coverage, and monitor the content and wording of any public statements. Broker AIM companies must retain a broker at all times. Their role is to: assess the level of investor interest in the company s shares at the time of admission to AIM and in any further fundraisings; provide on-going advice on market-related and trading-related matters; advise on the pricing of shares and investment opportunities. The broker will often have its own institutional research department that is responsible for producing research on companies that provide investors with an analysis of the company. Typically the Nomad also acts as the company s broker. The admission document Potential investors will base their investment decisions on the information contained in the admission document. The admission document includes factual information about the company and its trading history as well as details of the directors backgrounds, the shareholders and financial information, such as: the historic trading and financial position of the company; the rights attaching to the ordinary shares; any other matters required by the AIM Rules for Companies. The admission document must also contain a working capital statement by the directors. This is a statement that, in the directors opinion and after having made due and careful enquiry, establishes whether the working capital available to the company will be sufficient for its present requirements, that is for at least 12 months from admission. In determining the available working capital, the amount of any fundraising may be taken into account. The directors of the company (as well as the company itself) must take responsibility for the contents of the admission document, confirming that it contains accurate and full information and that there are no material omissions. 4 A guide to joining AIM
How long will it take? An AIM transaction will take typically three to six months. The actual timetable will depend on how much preparatory work has already been carried out and whether any significant issues are identified during the due diligence process. The AIM admission timetable below demonstrates a typical process. Month 1 Month 2 Month 3 Month 4 General Appointment of key advisors Preparation of investor story General planning and preparation Reporting accountants Legal advisers Regulation and documentation Long form report FPP review Working capital report Short form report(s) Legal due diligence Draft legal documentation Admission document verification Drafting admission document Nomad verification process PATHFINDER DAY IMPACT DAY Marketing Announcement of possible flotation Pre-marketing Broker research Preparation for road-show Corporate governance There is no formal corporate governance regime that AIM companies must comply with. However, the Quoted Companies Alliance has published a set of voluntary corporate governance guidelines for AIM companies, to which companies admitting to AIM are recommended to adopt. We highlight that from 30 June 2018, AIM companies will be required to comply or explain against a recognised industry code such as the Quoted Companies Alliance guidelines. A guide to joining AIM 5
How much does it all cost? The costs involved in a successful AIM flotation can vary significantly. The amount of money raised (commissions charged by brokers typically range from 4% to 5%), whether any material issues arise during the due diligence process that need to be addressed and whether the publication of a prospectus is required, all affect the overall cost of the admission process. What happens after admission? Once a company has floated on AIM, there are a number of obligations set out in the AIM Rules which the company must comply with and for which the directors are ultimately responsible. AIM companies are subject to continuing obligations which include: publishing price-sensitive information (e.g. new developments which may significantly affect the share price) without delay; obtaining shareholder approval for certain significant corporate transactions; producing and filing half-yearly financial statements (within three months of the end of the period); producing and filing annual financial statements (within six months of the year-end). The Nomad will continue to advise the directors on their responsibilities and obligations whilst the company s shares are traded on AIM to ensure that the company complies with the requirements of AIM. We were very grateful for all the support and professional advice provided by the Moore Stephens Corporate Finance team, who have been immensely proactive and dedicated throughout the IPO process. We look forward to continuing our work with the team on successfully achieving our next phase of strategic development. Soon Bang Gee, Executive Director of AIQ Limited 6 A guide to joining AIM
The reporting accountants role includes: Financial position and prospects procedures (FPP) board memo Content High-level financial controls including management structure, assurance framework, and corporate governance structure. Management reporting framework including board reporting, analysis and commentary. IT environment including details of current hardware and software in use, adequacy and fitness for purpose, IT strategy, technical support and disaster recovery. The financial accounting procedures including details of central and local finance teams and qualifications, key financial systems and controls and treasury management. How we can help you The FPP board memo is a specific requirement for the UK capital markets, and whilst the challenge is unique for each company, we are well placed to provide a tailored experience for the company through our experienced capital markets team. We will draw on our expertise to carry out an efficient assessment of the adequacy and robustness of the company s governance structure. This will also involve discussions with local and central management. Where desirable, we will mobilise local teams to combine insightful expertise with local language and knowledge. Accountants report (or short form report) Content Three year consolidated financial information to be included in the AIM admission document (if applicable). Significant disclosure required of related parties and directors remuneration. How we can help you Moore Stephens has developed a reporting accountants work programme which will be tailored to each company. This will allow us to review other auditors work with maximum efficiency and assurance, avoid unnecessary duplication of work and reduce costs. A guide to joining AIM 7
Long form report Content Comprehensive financial due diligence review on the history and trading results of the business including information on management, employees, products and marketing, production and market and competitors. A review of the financial information including current year trading and trading results for the previous three years including assets and liabilities, profit and loss account and cash flow. Other matters such as litigation, insurance cover and licences. How we can help you We will involve our capital markets team in discussion with management to obtain any information that we are required to report, in accordance with a tailored work programme. The long form report requires significantly more detailed information than an audit: our team is trained to make the data collection and processing phase highly efficient for the company s management. We will review audit working papers to avoid repeating work unnecessarily where it has already been carried out by other professionals. Our tax experts have deep knowledge of issues in each jurisdiction and will liaise with the reporting accountant tax team to ensure an efficient process is provided and to minimise any disruption caused to management s day to day business. Working capital report Content A description of the basis of preparation of the company s financial projections. A review of the key trading and cash flow assumptions and an assessment of the risks inherent in them. An assessment of historical budgeting accuracy. Commentary upon: the historical and projected capital expenditure requirements; movements in working capital balances; the volatility of cash flows. Cash and covenant headroom. Sensitivity analysis with upside and downside scenarios. How we can help you Leverage the work performed by the capital markets team on the company s working capital model to ensure we work to a high level of efficiency. 8 A guide to joining AIM
Our AIM credentials Recent transactions where we have acted as reporting accountants and advisors include: Global Invacom Grand Group Investment Jiasen International Holdings K&C Reit Technology & media Financial services & insurance Manufacturing Real estate & leisure A selection of our current AIM clients Thalassa Holdings Ltd Sigma Capital Group PLC Dewhurst PLC European Wealth Group Ltd Energy, mining & renewables Real estate Manufacturing Financial services 1PM PLC Science in Sport PLC Frontier IP Group PLC Minoan Group PLC Financial services Food producers Professional practices Travel & leisure Caribbean Investment Holdings M Winkworth PLC Goldplat PLC Distil PLC Financial services Real estate Mining Beverage producers Moore Stephens is ranked 9th in the UK corporate adviser rankings, acting as auditors for stock market clients with a combined market cap of over 750m. A guide to joining AIM 9
About Moore Stephens We help you thrive in a changing world. We provide all the support and guidance you need to deal with new risks and opportunities. We ensure easy access to the right people, so decisions can be made quickly and confidently. A consistent team will partner with you to support your aspirations and contribute to your success. You ll have access to a range of core services, including audit, accounting, tax, risk and systems assurance, corporate finance, restructuring and insolvency, wealth management and disputes analysis. As a Top 10 accounting and advisory network we support a broad range of individuals and entrepreneurs, large organisations and complex international businesses. If your business and personal interactions need to expand, we ll help make it happen coordinating advice from a network of offices throughout the UK and in more than 100 countries. Moore Stephens globally Moore Stephens International is the 11 th largest global accountancy and consulting network, headquartered in London. Contact information If you would like further information on any item within this brochure please contact us. Phil Cowan Partner Head of Corporate Finance D +44 (0)20 7651 1807 phil.cowan@moorestephens.com Marty Lau Partner Head of Capital Markets T +44 (0)20 7334 9191 marty.lau@moorestephens.com Dougie Hunter Director D +44 (0)20 7651 1197 dougie.hunter@moorestephens.com Ryan Biscomb Associate Director D +44 (0)20 7651 1476 ryan.biscomb@moorestephens.com With fees of over US$2.9 billion and offices in 112 countries, clients have access to the resources and capabilities to meet their global needs. Moore Stephens LLP, 150 Aldersgate Street, London EC1A 4AB T +44 (0)20 7334 9191 www.moorestephens.co.uk We believe the information contained herein to be correct at the time of going to press, but we cannot accept any responsibility for any loss occasioned to any person as a result of action or refraining from action as a result of any item herein. Printed and published by Moore Stephens LLP, a member firm of Moore Stephens International Limited, a worldwide network of independent firms. Moore Stephens LLP is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the Financial Conduct Authority for investment business. DPS39255 March 2018