Small caps face acquisition danger, says survey
Smaller AIM companies could increasingly fall victim to takeovers. That's the view of Richard Baker, partner at the Midlands office of tax and advisory firm Crowe Clark Whitehill.
His comments come after a survey by the firm revealed the combination of low earnings multiples, the number of small companies and ongoing compliance costs meant that for some, "the choices were stark – acquire, be acquired or delist".
The survey researched the likely levels of acquisition and disposal activity both for constituent AIM companies and for potential buyers or strategic investors.
Most vulnerable were the 247 companies valued at less than £5m, said Baker.
He added: "A major issue that can put a brake on potential M&A activity on AIM is that of the compliance and regulatory costs for those companies subject to the Takeover Code and, where private equity investors or acquirers may be involved, the inherent uncertainty of a public offer.
"One mitigating factor is that in many smaller AIM companies the founder shareholders still retain actual or de facto control of the board and therefore any potential financial or strategic investor should have some level of comfort that once an offer is made it will not be frustrated or trumped by third parties."
