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Choose a likely target and take AIM carefully.

Byline: By Alan Fletcher

Alan Fletcher head of corporate at Eversheds's Newcastle office looks at The Alternative Investment Market, one of the success stories of the last decade

The Alternative Investment Market was established in 1995 to attract smaller companies to the possibility of flotation. With its lower costs than the main stock market and more relaxed regulatory regime, it has been one of the success stories of the world's equity markets over the past four years.

The trend is set to continue in 2006 with 36 companies newly listed in January and February alone.

Companies typically consider floating in order to raise capital for expansion or use in research and development. AIM also appeals to regionally strong and fast-growing companies wishing to raise their profile and/or give members a chance to capitalise their investments.

Alongside these considerations, AIM flotations can also provide incentives to staff via share schemes and taxation benefits. In addition, it gives companies the ability to expand ( as the clear share price of a listed share means that a company's shares can be used as a consideration for acquisitions.

A perceived disadvantage is the cost of flotation. As with many corporate transactions, in terms of both finances and management time, the input required can be a disincentive ( in financial terms, the cost of an average flotation on AIM often reaches pounds 200,000. Once listed, the company must comply with the AIM rules and there are more stringent corporate governance and financial reporting requirements than for an unlisted company.

There are a number of steps to ensure the success of the float and many will depend on the assistance you get from a team of skilled advisers.

These will include a nominated adviser to assist the company in complying with the AIM rules; a broker who will determine the pricing and help place the shares and promote the company; solicitors and accountants.

Choose your advisers carefully ( you will need them both before and after flotation.

The company itself can have a major influence on the cost and effectiveness of the professional work undertaken on its behalf. Ideally, one individual from the company should co-ordinate all aspects of the flotation, supported by a committee of the board with direct responsibility.

As with all corporate transactions, early preparation is the key. Get your house in order before you start the flotation process. An early review of your assets, rights, contractual relationships and liabilities will help you avoid significant and costly delays. Make sure you really can prove everything you want to write and say about your company.

The admission document or prospectus will need to be fully verified, therefore each statement made in the document must be independently checked.

Further documents also govern the process. Alongside the admission document, there are the directors' statements of responsibilities, letters of compliance with AIM rules, the nominated advisers/brokers agreement together with a placing agreement or offer agreement, depending on the type of fundraising.

However, once the above process has been undertaken (normally approximately 12 weeks), the result will be a final meeting where all the documents are signed, then the nominated adviser will make the application to have the shares listed.
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Copyright 2006 Gale, Cengage Learning. All rights reserved.

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Publication:The Journal (Newcastle, England)
Date:May 11, 2006
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