Preparing a company for IPO
Although the conditions that must be satisfied to list a company
on AIM are much less onerous than those for the Main Market and
certain other markets, the work involved in bringing the company to
market should not be underestimated. Critical to the success
of the process will be careful planning and coordinated teamwork by
the company and its advisers.
Appointment of advisers
Choosing good quality corporate advisers is one of
the first and most important things that you must do in preparation
for a flotation - and is also one of the most difficult. The
key advisers will include:
The Nomad
The Nomad will guide the
company through the AIM application procedure and advise it on a
continuing basis after flotation. The Nomad will usually be
responsible for maintaining the admission document (or prospectus)
and will arrange for the scheduling of the date of admission of the
company to the market.
The Broker
The broker acts as the
company's main interface with the market and potential investors.
This may be the same firm as the Nomad and must be a member of the
London Stock Exchange.
The Company's
lawyers
The responsibilities of the
company's lawyers include conducting the legal due diligence
process, advising on the legal aspects of the issue and producing
the legal documentation. The company's lawyers assist the directors
in the verification of the admission document and provide guidance
for the directors as to the nature of their responsibilities and
obligations as directors of AIM quoted companies.
The Nomad's
lawyers
The Nomad's lawyers' primary
role is to advise the Nomad/broker on the admission process and any
placing and to produce the placing agreement.
The Reporting
accountant
The role of the reporting
accountant in a flotation is separate from that of the company's
existing auditors but can be (and often is) fulfilled by a separate
team in the same firm. Essentially, the reporting accountant is
responsible for reviewing the business, the company's financial
records and internal systems and will comment on the company's
working capital statements.
Directors and management
issues
Investors will look for a strong management
team with a good range of skills to run the business in the public
spotlight. Although compliance with the corporate governance
requirements of the Combined Code is voluntary, investor pressure
will probably require the appointment of an appropriate number of
independent non-executive directors, the splitting of the roles of
chairman and chief executive and the establishment of new board
committees such as the audit, remuneration and nominations
committees.
Lock-in requirements
Where the issuer's main business has not been
independent and earning revenue for at least two years, all
directors, substantial shareholders, employees with 0.5 per cent or
more and certain other persons connected with the issuer must agree
not to sell their shares for at least year from admission. In
addition, the broker will usually require lock-in undertakings from
management and major shareholders in other circumstances.
Admission document and
verification
The preparation of the admission document and
its verification can take up a great deal of management time. The
company should agree at an early stage which members of its team
will be responsible for the production of the admission document
and its verification.
Due
diligence
The Nomad will be keen to see that a thorough
due diligence exercise is conducted on the company and its
management. The lawyers will undertake legal due diligence
while the reporting accountants conduct financial due diligence on
the company. Where the issuer operates in the mining, oil or
gas resources sector, a report may be needed from an independent
expert on the quality and existence of the company's material
assets.
Reorganisation and
restructuring
The due diligence exercise should highlight
any changes that will be required to the company's structure before
admission. Common issues include re-registering the issuer as a
public company to satisfy the AIM Rules, amending the articles of
association of the company to those appropriate for a listed
company, reorganising the share capital into one class of shares
and carrying out any internal reorganisations to ensure that all
the assets of the business are held within the correct group of
companies.
Share schemes
Employee share incentives can be a good way
for any company to attract, retain, motivate and remunerate
employees and directors.
