Private equity boost sees AIM values soar

Private equity boost sees AIM values soarDavid Jetuah
The AIM market is becoming a popular destination for private equity and property companies, Grant Thornton has found.
Because of an influx in private equity, the average market value of AIM companies has rocketed, surpassing £60m for the first time, up 50% from £40m in 2005. Secondary listings have also offered a major boost to the overall money raised on AIM in the year to date.
Philip Secrett, a partner at Grant Thornton Corporate Finance, said: ‘The average size of AIM companies has become somewhat distorted by the influx of listings from large property and private equity funds, but there will always be room for the market’s core constituents of growth companies looking to list in a flexible regulatory environment.’
The ‘junior exchange’ qualifies for key tax breaks, which may explain why the market has become attractive to the buyout firms. The government has been under sustained pressure to withdraw the taper relief that allows private equity executives to have their profits treated as capital gains instead of income tax, gifting them a significant tax saving.
Grant Thornton’s market experts believe the credit crunch will continue to impact AIM listings in the short term, with a modest number of companies intending to list in the first part of October.
Secrett said: ‘The market has definitely drawn breath in September after racing ahead during a record second quarter and then into July. The drop off in September has been greater than in the past, but with an order book of prospective floats looking to raise in aggregate more than £500m, we are confident the year will end in a stronger position than September would indicate.’
In September, new listings collectively raised just £88m, Grant Thornton’s study showed, but a number of major IPOs currently in the pipeline are expected to bolster the AIM market.
This prospective fundraising includes a mixture of innovative UK trading companies and several large funds from Asia. The international diversity of these cross-border floats reflects the fact that AIM now has the ability to attract companies and investors from around the globe, cushioning it from some of the recent market volatility in the developed world, Grant Thornton said.
Overall £1.69bn was raised during the third quarter of 2007, an increase of £358m on the same period last year and the strongest third quarter for new admissions on AIM to date.
Secrett added: ‘We are seeing a more cautious approach towards new listings, but if anything this will help create an even more robust and transparent market as lenders and investors want to be absolutely confident in a business’s fundamentals.’