FINANCIER WORLDWIDE corporate finance intelligence R E P R I N T R - PDF document

FINANCIER WORLDWIDE corporate finance intelligence R E P R I N T R E P R I N T E D ฀ F R O M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North฀American฀Middle฀Market฀Review฀2006฀|฀a฀financier฀worldwide฀supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US฀companies฀ AIMing฀for฀the฀UK

www.financierworldwide.com ฀ ฀|฀฀ North฀American฀Middle฀Market฀Review฀2006 ฀฀FW฀฀฀฀฀REPRINT US฀companies฀AIMing฀for฀the฀UK CAPITALmarkets BY HILARY WINTER , DANIEL K . WINTERFELDT AND TANYA PONTON A IM, a market operated by the London marketing concerns. However, there are from admission). US companies seeking Stock Exchange (LSE), was estab- also some corporate governance and share- admission to AIM should also anticipate an lished in 1995 to encourage the admission in holding considerations distinctive from increased cost in terms of time and money the UK of growth companies, usually with SEC registration requirements. in managing a UK investor base. a market capitalisation of under $500m. As in the US, any company embarking Although it is not a requirement for AIM While initially AIM attracted primarily upon an IPO will require a team of advisers companies to comply with the English UK companies, in recent years it has seen which will usually include underwriters, corporate governance recommendations set a growth in foreign companies seeking lawyers, accountants, registrars and public out in the Combined Code (which applies admission. There are currently over 1,400 relations consultants. In addition to those to companies whose shares are admitted companies admitted to AIM, and the market advisers, AIM requires the appointment of a to the main market in the UK), in practice, is growing extremely rapidly with approxi- Nominated Adviser (Nomad), a role normal- most AIM companies do adopt some of the mately 400 companies joining the market in ly fulfilled by one of the investment banks. recommendations. As a result, it may well 2005 alone. One of the drivers for this rapid The Nomad is responsible for determining be necessary to re-constitute the board of growth has been the increase in non-UK the company’s suitability for admission, as directors to include a minimum number companies coming to the market – there are well as overseeing the preparation of the of- of independent non-executive directors, to now approximately 220 non-UK compa- fering document (an AIM admission docu- appoint remuneration and audit commit- nies, including about 30 US companies (19 ment) itself and performing an ongoing role tees and to adopt sound systems of internal of which joined the market in 2005). of advising and guiding the company on the control. The Nomad will advise on the re- US companies come to AIM for various rules applicable to AIM. This is distinctive quirements it considers appropriate for the reasons including avoidance of costs and from the US, where the SEC directly over- success of the IPO in greater depth. burdens associated with US listing and sees the offering process, including a time An advantage to seeking admission to regulatory requirements, relative speed of consuming review of the offering document. AIM versus listing on NASDAQ or the timetable, suitability for size and level of The Nomad has direct obligations which it NYSE is the considerably lower listing fees development of the company, favourable owes solely to the LSE. – around $7,000 flat fee on AIM compared valuations for the company, an increase in Compared with a US listing, there are with a $100,000 minimum on NASDAQ. the company’s profile in Europe and access limited restrictions on the ability of a It is worth noting that with proper plan- to sophisticated international investors. company to have its shares admitted to ning, US companies may simultaneously What makes admission to AIM particularly trading on AIM. There is no requirement carry out a private placement to institutional attractive to growth companies is the avoid- for a minimum historic trading record, no investors in the US without the need to reg- ance of the costs associated with a full US minimum amount of shares of the company ister the shares with the SEC. registration with the US Securities and that must be in public hands, no minimum The AIM admission document is the prin- Exchange Commission (SEC). For example, per share bid price and no minimum market cipal selling document and the document the cost for a company in complying with capitalisation. There are, however, some on the basis of which investors will invest. the Sarbanes-Oxley Act of 2002 alone is conditions that the LSE imposes under the Its contents are prescribed by the AIM rules estimated to be between $500,000 and $2m AIM rules which are different from those and in addition to the specific content re- annually. While admission to AIM certainly in the US including a mandatory lock-up of quirements, it must contain all information has its advantages for US companies, it also one year from admission for directors, em- necessary for a potential investor to make an brings with it certain challenges unique to ployees and significant shareholders where informed assessment of the assets, liabilities US issuers. the company does not have a two year and prospects of the company so as to en- revenue earning record, free transferability able it to determine whether or not to invest Comparison with a US Listing of shares, a requirement that all shares of in the company’s shares. The admission The process for admission to AIM has com- the class admitted to AIM must be admitted document also serves as the prospectus as ponents similar to an IPO registered in the and working capital requirements (basically opposed to a registration statement plus pro- US, such as publicity restrictions, due dili- a public statement that the company has suf- spectus in the US. Provided that the offering gence requirements, employee matters and ficient working capital for at least one year involves only qualified investors (essentially 8