AIM survey: 1:5 companies shelved plans for acquisitions in the last year while 1:3 put fundraising on hold

New research among Aim-listed companies reveals that while one in five companies which took part in the survey shelved plans for acquisitions in the last year, two thirds are still looking to make an acquisition at some stage in the future. Moreover, four in ten firms hope to make an acquisition in the coming year.

These are just some of the results revealed in a survey carried out by Smith & Williamson, the accountancy and financial services group. 123 Aim-listed companies, whose primary operations are in the UK, took part in the research. Further details on acquisitions are shown in the table below.

Acquisitions
We shelved plans to make acquisitions last year:
Yes 19%
No 81%

Do you anticipate making an acquisition at some stage in the future?

Fundraising
The proportion of companies which have decided to put fundraising on hold has almost doubled, shifting from one in five in last year's survey to just over one in three (36%). Nevertheless this means that almost two thirds of those surveyed do intend to raise further money on Aim and almost four in ten wish to do so in the next 12 months. Details are below.

Do you anticipate further fundraising?

Commenting on this decline in appetite to raise funds and make acquisitions, John Cowie, head of Aim at Smith & Williamson said:

"The recession, aggravated by the contraction in the debt market has pushed share prices far lower than companies could have anticipated. This is the key reason why companies are unwilling to raise funds and make acquisitions - they don't want to issue equity at a price well below what they believe is reasonable."

Difficulties in raising finance
Unsurprisingly, 73% of those polled felt that raising bank finance was harder than they could ever remember. Similarly, while 79% of the overall sample group reported that raising equity finance had become more difficult, this issue was particularly acute among the smallest companies* which took part as 92% of this group felt that raising equity finance had got harder. (*Companies with a market capitalisation of less than £5 million).

Cowie said: "Cash is king right now and only the very best opportunities are attracting the attention of the Aim investment community so equity fundraising is incredibly tough. With the reluctance of the banks to lend, acquisitive Aim companies no longer have access to the gearing they need to make an acquisition economic. The best way to resolve this is to encourage banks to lend and to free up cash.

"This lack of finance is not a problem exclusive to Aim, of course, but it does tend to affect companies more sharply at the smaller end of the spectrum, which is Aim's traditional territory."

It is harder to raise bank finance than ever before:

It is harder to raise equity finance than last year:

Aim has been good for our company
An overwhelming majority of 83% of those questioned were positive or neutral about their experience of Aim leaving only 17% for whom the experience had been negative.

Despite the credit crisis, listing on Aim has been good for our company

Details of the survey
FDs, CEOs and senior decision makers from 123 different UK-based Aim-listed companies took part in the survey. With 938 UK-based Aim companies on the market at the end of December 2008, the sample of 123 represents 1 in 8 of the UK-based companies on Aim.

Background on companies which responded:
Period of time listed on Aim:
Less than 2 years 19%
2 - 5 years 52%
More than 5 years 29%

Market capitalisation:
Under £5million 31%
£5million - £50million 59%
Over £50 million 10%

Approximate proportion of shares in public hands:
Less than 20% 10%
20-50% 39%
More than 50% 51%

For further information:
John Cowie, head of Aim, Smith & Williamson, the accountancy and financial services group
020 7131 4333

PR queries
Kate Harrison / Jess Koslow 020 7131 4228 / 4264

Note to editors
Smith & Williamson is an independent professional and financial services group employing over 1,500 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-to-large corporates. The group operates from offices in London, Belfast, Birmingham, Bristol, Dublin, Glasgow, Guildford, Maidstone, North London, Salisbury, Southampton and Worcester.

Smith & Williamson Limited Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.

Smith & Williamson Corporate Finance Limited Authorised and regulated by the Financial Services Authority A member of the London Stock Exchange A member of M&A International

Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.