Publications featured in include: Accountancy Daily, Accountancy Today and Reuters newswire.
- London’s junior market weathers COVID storm and avoids insolvencies
- AIM M&A deals begin to return after pandemic lull
Our research shows that the number of companies delisting from AIM due to financial stress is at its lowest level on record (see graph below).
A key reason for the low levels of insolvency among AIM companies is the London Stock Exchange moving the market towards larger, more financially stable businesses over the last ten-plus years. Compared to the last financial crisis far more of AIM’s companies are now later in their development cycle and either at or near profitability. This means they are more likely to get support from shareholders for additional fundraising during times of economic stress.
Another reason for low levels of AIM company insolvencies is the London Stock Exchange’s commitment to improving to governance on the market in recent years. For example, AIM companies are now obliged to comply with a corporate governance code as part of a series of regulatory reforms aimed at improving investor confidence in AIM.
Daniel Hutson, Partner in our London office, comments: “The pandemic year has turned into an unexpected success story for AIM.
Some expected the effects of the pandemic on AIM to look similar to the effects of the last financial crisis. That simply hasn’t happened – the market has weathered the storm extremely well. 2009/10 saw a huge wave of insolvencies among AIM companies but the current market constituents are a much higher-quality and more diverse group.”
M&A deals beginning to return to AIM
Another positive sign for AIM is the return of M&A deals to the market following a lull during the early months of the pandemic. 15 AIM M&A deals were completed during the six months from October 2020 to March 2021, compared to just seven in the previous six months.
The firm adds that it is also encouraging to see that the M&A deals in recent months have been growth acquisitions by PE and trade buyers rather than purchases of distressed assets. M&A deals for AIM companies in recent months include:
- The £860m purchase of game developer Codemasters by US giant EA in February 2021
- The March 2021 acquisition of the Applegreen petrol station group by a consortium including private equity firm Blackstone for £650m
Daniel Hutson adds: “Some AIM businesses have become very attractive M&A targets in over the past year. UK equities are still relatively good value, especially in comparison with the US and there are certainly plenty of US buyers in the market.”
More green shoots for AIM can be seen in the early signs of a return for IPOs, with several IPOs are scheduled for the coming weeks. There have only been 26 IPOs on the market in the past year.
Daniel Hutson says: “When IPOs return to their usual rate we can say that AIM is genuinely ‘back to normal’. While we’re not quite there yet, signs for the second quarter of the year are promising.”
AIM delistings due to financial stress and insolvency at all-time low – only a fraction of financial crisis peak