AIM sees lowest level of company departures in six years

Publications that covered this article include The Daily Express and The Daily Telegraph, 9 July 2012.

  • Company departures fall to six year low, as new listings rise
  • AIM not immune to Eurozone crisis, as insolvencies rise and M&As fall

AIM continues to shrug off the worst effects of the Eurozone crisis, with the most recent quarter seeing the fewest number of companies to depart the market since Q2 2006, according to our latest research.

Just 20 companies left AIM in the last quarter (Q2 2012), down 43% from the 35 who departed in the previous quarter. AIM also saw 19 new companies joining the market, up from just 10 in the previous quarter.

As many as 73 companies per quarter left AIM during the peak of the recession.

AIM IPOs are also showing slight signs of recovery, with the average IPO raising £6 million so far this year, up from £5.5million during the same period last year. However, this figure is still some way off the average £17 million raised per IPO in 2008, prior to the recession.*

Laurence Sacker, partner at our London office, comments: “AIM has managed to stave off the worst ravages of the Eurozone crisis so far, despite considerable turbulence on other markets over the course of the year. It shows that companies have confidence in AIM’s ability to get them through this period of uncertainty.”

“While it has been a good quarter, AIM is still a long way from good health. The IPO market has been devastated by the recession and this has reflected in AIM company fundraisings. It will take time, and a considerable return of investor confidence, before the IPO market bounces back to its pre-recession heights.”

“AIM remains a natural home for young and ambitious companies and has been particularly popular in recent months with companies in the utilities, natural resources and technology sectors. It will be interesting to see whether this continues if commodities prices continue to weaken.”

Number of companies leaving AIM versus number of companies joining

resizedimage507265-AIMQ29.07.12

AIM insolvencies up as M&A activity falls

However, AIM has not been completely immune from the recent Eurozone crisis.

Q2 saw a rise in the number of companies leaving AIM due to financial stress. Nine of the companies (45%) leaving AIM in Q2 cited financial stress or insolvency as a reason for leaving the market, compared to just five companies (14%) in the previous quarter.

M&A activity has also slowed, with just seven deals resulting in companies leaving AIM after being taken over in Q2 2012. This compares to 21 in the previous quarter and 13 in Q2 2011. It is the lowest quarterly number of exits through M&A since Q1 2009.

Laurence comments: “Lower levels of takeover activity and higher levels of insolvency amongst AIM companies is exactly the opposite of what AIM investors want.”

“Bearing that in mind it’s not surprising that the AIM index is near a two and half year low.”

“By the same measure, slow economic growth has meant less than ideal trading conditions for many domestically-focussed AIM companies. Unfortunately that has led to a rise in the number of AIM companies being forced off the AIM market because of weak finances.”

*IPO fundraisings from Jan 1st – May 31st.