One in 16 AIM businesses fail

One in 16 companies listed on AIM have been involved in a formal insolvency
process during the last five years, according to a new survey by Begbies
Traynor.

Well-known AIM casualties that have suffered either administration,
receivership or liquidation over the period include Leicester City FC, bar chain
Po Na Na and brewers Old Monk.

In addition, 49% of AIM stocks left the exchange during the same period, for
reasons such as merging with another company, moving to a more senior market or
delisting.

But Begbies senior London partner Nick Hood said that many more newly-formed
companies that had joined AIM survive, compared to those that stay private.

‘The companies that we analysed usually collapsed from either making
acquisitions that didn’t live up to expectations, or from organic
over-expansion, where costs ran ahead of revenues, stressing cash flow beyond
survival point,’ said Hood.

London and the southeast accounted for over half of the corporate failures,
and Yorkshire and Humberside saw 12% of AIM companies fail.

Engineering companies fared the worst: the sector represented 20% of the
total insolvencies during the five years.

Hood said: ‘Companies that had the highest number of formal failures traded
in highly competitive markets such as telecoms, IT and software and
engineering.’