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In the wrong place at the wrong time?

Simon Watkins

Indeed, of all the firms operating in the advisory space only three others are listed: AFH Financial, IFG Group and Hargreaves Lansdown, which was admitted into the FTSE 100 in March 2011.

“There is nothing wrong in listing on Aim in itself for many firms, provided that you have worked out that it is the right fit for your type of company in terms of reporting and cashflow requirements, but for some firms in some sectors the balance tips the wrong way for them,” said Nick Heather, partner of legal firm, Lawrence Graham, in London.

“The fact is that Aim does afford many companies the opportunity to raise capital on much less generally onerous terms than would a listing on the main stock exchange, but at a time of flux in an industry, as we have seen with the post-retail distribution review in the world of IFAs, such a listing may become unsuitable,” he added.

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Launched in 1995 by the London Stock Exchange, over £30bn has now been raised through Aim through IPOs and capital-raising and many companies listed on Aim have made the transition to the main market.

With Aim companies currently coming from 37 sectors, 90 sub-sectors, and 26 countries, then, is there any more specific reasons why a sound IFA looking to expand its business should not do so through a listing on Aim going forward?

Lighthouse itself said that the onset of the RDR and increased litigation over potential mis-selling within the IFA sector had resulted in a far more uncertain trading environment than has ever previously existed.

In addition, it stated, many IFA businesses, are undergoing very significant restructurings of their processes and operations, in order to be able to trade post the RDR.

Given these changes, it said, it was becoming increasingly difficult to indicate reliably to the investment community what future terms of trade would prevail within the sector, and hence virtually impossible to construct reliable valuation matrixes.

Moreover, there were competitive factors at play, according to the firm, which pointed out that a low share price would hinder any efforts to expand through acquisition, or a potential sale, and that Aim reporting requirements placed it at a disadvantage to unlisted competitors, in that Lighthouse Group would be significantly adapting its business and operations, and premature announcement of plans and actions being taken could alert competitors and damage the group’s prospects.

A low share price, of course, could also have a more personal dimension on senior personnel than just the ramifications for acquisition or a sale, according to Philip Secrett, corporate finance partner for Grant Thornton’s capital markets team, as performance packages can often be predicated upon equity stakes in a firm, or future options on shares in it.

Having said this, with Aim’s regulatory model based on a ‘comply-or-explain’ option that lets listed companies either comply with the rules or explain why it has decided not to comply with them, the notion that such limited compliance would have such a major effect on the listing decision of most IFAs looks stretched, given that Aim had relatively few such rules, he added.