AIM to bottom out by end of 2010
The AIM market will bottom out in the second half of 2010 with only 1,200 companies listed, according to analysis by Deloitte. The business consultancy said that following 30 consecutive months of declining numbers on the junior market, it will reach its lowest point by the end of the year before kick-starting activity into 2011.
Roger Esler, corporate finance and debt advisory partner at Deloitte, said: “The past six months have displayed some positive characteristics compared with those seen this time a year ago, with a modest uptake in the numbers of companies listing on both the main and the junior markets.
“There has been a steady increase in the levels of activity with Q2 of this year seeing 18 new listings, compared with just eight in the same period last year. This is an increase from the 16 new admissions we saw in Q1. This has coincided with the rate of companies leaving the market slowing in recent times, meaning that we may shortly see an end to the long decline in the number of listed companies on AIM.”
Esler added: “The failure of AIM to deliver the IPOs that were promised in 2009 is in part due to macroeconomic factors but also to the renewed appetite of private equity and strategic trade buyers at the larger end of the market – we have seen a number of such transactions in our regional market.
"However, an additional factor is that businesses with high levels of debt face structural challenges in an IPO as they are required to issue new shares in an IPO in order to reduce this debt to much lower City norms. This impacts pricing and dilutes existing shareholders. Many private equity backed companies will fall into this category and so this particular exit route requires careful thought and planning.”
