Marcus Stuttard, Head of UK Primary Markets at London Stock Exchange looks at what companies should be considering when transitioning from AIM to the Main Market.
When AIM [Alternative Investment Market] was founded, 20 years ago this year, it was designed specifically as a market for growth companies. That meant that for many businesses, particularly the largest, AIM was and remains to this day, a temporary home to be used as a platform for growth.
In the case of almost 200 companies, including household names such as Dominos Pizza, Fitness First and Hiscox, AIM was a platform for ‘graduation’ to the Main Market. While AIM, the world’s most successful growth market offers quoted companies access to an unrivalled pool of international institutional capital and a well adapted regulatory regime, there are broadly two reasons why businesses choose to move to the Main Market.
First, most institutional investors will typically have significantly larger mandates for Premium-listed companies making it potentially easier for them to back high growth, mid-caps looking for further finance. Second, when a company reaches a size where it would be included in the FTSE 250 (for which a Premium listing is a condition) it would automatically attract investment from funds tracking the index. The FTSE brand itself also carries weight, and has helped companies looking to grow internationally or seeking to attract overseas investors.
For companies looking to make the move, it would be common that for efficiency’s sake, a transition to the Main Market which will require a prospectus, would probably accompany either a significant transaction or fundraising. For a company’s CFO and finance team, combining the two operations will be significantly more straightforward than running them in sequence and provides a single moment of focus for investors considering the company.
Typically an AIM company won’t need to change its structure when moving to the Main Market but we would advise companies to review the UK Corporate Governance code, to make sure their own internal procedures and arrangements have developed in line with requirements.
This is also an opportune moment for a company to reconsider the make up of its board and non-executive directors. The talent pool of NEDs available to Main Market companies probably has a different profile and boards should consider whether they need to take on one or more directors with FTSE 250+ experience. It’s worth noting too that the move to the Main Market is likely to bring greater interaction with often vocal shareholder groups and consultants, and CFOs may want to consider strengthening their IR teams and support to handle the increased workload.
There is no mandated size or time at which a company must move and there are billion pound businesses doing very well on AIM. However we fully recognise the benefits for some companies of moving from AIM and the team at London Stock Exchange is always on hand to discuss the pros, cons and practicalities of making the transition to the Main Market.
Marcus Stuttard, Head of AIM, London Stock Exchange