21 February 2005
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There were 286 new issues on AIM last year. By any reckoning that is pretty phenomenal. In the 21 months covered by The Lawyer's last AIM survey (from January 2002 to October 2003) there were just 133. With the main market still ponderous, law firms of all shapes and sizes have been fighting to get a slice of the action, making this the most anticipated AIM survey The Lawyer has ever conducted.
Driving this surge in activity have been the booming mining and energy sectors, while even technology stocks are making a comeback for the fist time since those halcyon dotcom days. Canadian companies have also embraced AIM's lighter regulation and the Americans are expected to follow. AIM has even hosted its first Chinese company, likely to be the first of many.
"It's part of the internationalisation of the equities markets. The exchange is a lot more receptive to international companies generally," says Berwin Leighton Paisner (BLP) head of corporate finance David Collins.
The return of TMT
BLP worked on 16 AIM deals last year, placing it fourth in our survey of more than 150 firms. Collins says that BLP has carved out a niche for itself advising Israeli companies and working in the betting and gaming industry. The firm also benefited from the AIM comeback of the technology, media and telecoms (TMT) sector last year. BLP managed a creditable four out of a total of 58 TMT deals, as well as two in TMT's close cousin pharmaceuticals and biotechnology.
The firm that really distinguished itself in the TMT sector was DLA Piper Rudnick Gray Cary. Eight of DLA Piper's 13 deals came from this sector. The contributions of corporate partners Robert Bishop and Charles Severs to that haul more than justified their decision to quit Shaw Pittman for DLA in late 2003.
"I was helped by the fact that I was asked to head up the TMT sector initiative in corporate," says Severs. "We've made sure that we know all the companies and financial institutions with a focus on that sector and we're now far better known in the market for public equity work."
Travers Smith finished second on the TMT league table with five deals, but a total of nine across all sectors failed to get the firm into our top 10. Memery Crystal, which did well across all sectors, Nabarro Nathanson, Osborne Clarke and Simmons & Simmons all matched BLP's four TMT deals. Olswang, Halliwells and Hammonds managed three apiece.
Hammonds had a steady year overall, with 13 deals in total. Its figures would have been more exciting had AIM specialist Martin Thomas not left for Hunton & Williams in August. Hunton should figure next year, while Hammonds may not.
Despite the astonishing return of TMT, many lawyers were raving about mining, oil and gas. None more so than Norton Rose. Eight of its 19 deals came in this sector. "We've done a lot in the mining, oil and gas sectors because we've got traditional strength in those areas," says Norton Rose partner Stephen Rigby.
Rigby noted the firm's connections with financial institutions Arbuthnot, Hoare Govett, Numis and Seymour Pierce as key drivers for the firm's growth.
The key roles
The key for all law firms involved with AIM is to bag the role advising the company rather than the nominated adviser (nomad). Typically, the fee for a simple company with a short trading record will be between £60,000 and £80,000. On a particularly large and complex transaction, fees might stretch to £200,000, but will usually come in at between £75,000 and £150,000. Despite this, firms' relationships with nomads are the key to gaining instructions from companies.
"We've seen law firms flocking to get a piece of the action. There's been a degree of undercutting from some firms, but we've found that fees have stood up pretty well," says Field Fisher Waterhouse (FFW) corporate partner Anthony Brockbank.
The only type of deal where that is not true is for the flotation of cash shells, where fees can be as little as £20,000. A cash shell will be floated with the promise of further transactions to come. FFW worked on three cash shell flotations in 2004, as did Beachcroft Wansbroughs, while Cobbetts and Hammonds bagged two apiece. Pending rule changes mean that cash shells are unlikely to provide much further work.
Cobbetts worked on 13 AIM deals in 2004, all of which were weighted heavily in favour of advising one specific nomad. The firm advised WH Ireland on nine listings last year. Its closest rival among WH Ireland's advisers was Gateley Wareing with five deals.
The most prolific nomad was Seymour Pierce, which completed 35 new issues. Memery Crystal was its most constant law firm partner with five deals. The other 30 Seymour Pierce transactions were spread fairly evenly around, with FFW and Watson Burton featuring most prominently. Other Memery Crystal clients include City Financial Associates, Noble & Co, Teather & Greenwood and Williams de Broe.
Following Seymour Pierce was Canadian firm Canaccord Capital with 21 deals. A strong relationship with Canaccord was the secret of much of Charles Russell's success. The firm stormed the list of the top 10 legal advisers on AIM flotations, winning instructions on 19 deals last year - second only to AIM specialists Memery Crystal. Charles Russell corporate head Simon Gilbert claims the firm has a generalist approach. "Our expertise is AIM listings. As long as we have sector expertise elsewhere in the firm we don't care whether the firm sells widgets or whatever." Charles Russell advised Canaccord on six deals, while Canadian law firm McCarthy Tétrault worked on five. Canadian rival Stikeman Elliott worked with Canaccord on a couple of deals and BLP handled two.
"Canaccord is our number one client when it comes to this type of work," says McCarthy Tétrault London managing partner Robert Brant. "It's the only Canadian dealer that's qualified to act as a nomad."
Canaccord is the tip of the Canadian iceberg when it comes to AIM floats, and McCarthy Tétrault is taking full advantage. The firm changed its focus at the turn of the millennium to counsel Canadian clients in London, in addition to the work it was trying to source from European clients doing business in Canada.
"It was 2003 when Canadian companies really started motoring, particularly Canadian companies with foreign assets that felt underappreciated in Canada and realised it's easier to raise capital in London," says Brant. "In Canada, a listing on the Toronto Stock Exchange is more akin to listing on the main market. There's a junior market, the Toronto Venture Exchange, which really is a junior market, and I think AIM is a step up from that."
Canaccord has a particular focus on mining, oil and gas, but is one client that Norton Rose did not advise. Chasing Norton Rose in that sector are Memery Crystal with seven deals, Charles Russell with six (all for Canaccord), Faegre Benson Hobson & Audley with six and Cobbetts with five. BLP, McCarthy and Trowers & Hamlins bagged two apiece.
Other brokers to have enjoyed good years include KBC Peel Hunt, Numis and Durlacher. KBC used Hammonds and Addleshaw Goddard more than any other firms. Numis's favourite firms were Nabarros, Shepherd + Wedderburn and Travers. Durlacher spread its 12 deals around evenly, with BLP, Burges Salmon, Eversheds, Manches, Penningtons and Travers all getting a bite of the cherry.
Companies in the pharmaceutical and biotechnology sectors have started to list on AIM without quite justifying the hype that (mostly US) law firms attach to those sectors. Last year, 14 new pharma/biotech companies listed on AIM, with Addleshaws, BLP, Jones Day, Memery Crystal and Osborne Clarke working on two each. Charles Russell, Dechert, McGrigors, Morgan Lewis & Bockius, Nabarro Nathanson and Pinsent Masons also undertook work in this sector.
The magic circle
The big City hitters have yet to pile into AIM in a way that might have been expected when accelerated initial public offerings (IPOs) looked like being the next sliced bread. Allen & Overy, Clifford Chance, Linklaters and Slaughter and May all make an appearance in the lower reaches of the chart, but there are no deals from Freshfields Bruckhaus Deringer or Herbert Smith. Lovells closed one AIM deal, advising Lehman Brothers on the flotation of M&C Saatchi. Aside from Norton Rose and Simmons (the latter doing eight deals), Ashurst was the most prolific major City firm, with four transactions. Three were for brokers Baird, Canaccord and Collins Stewart, with the firm also advising African Copper on its listing.
The two biggest AIM deals were accelerated IPOs. Travers advised The Lawyer's parent company Centaur Holdings and broker Numis on its £134m IPO. Fittingly, considering its excellent dealflow, Norton Rose advised PD Ports and Collins Stewart on the biggest deal of the year, PD Port's £158m accelerated IPO.
Rigby at Norton Rose concludes: "AIM is a good source because the clients tend to be growth companies using AIM as a steppingstone for other deals. As a corporate lawyer, if you get in on the ground level, you could have a client for life."
|Top three deals in 2004|
|Rank||Firm||No of deals|
|9||Field Fisher Waterhouse||12|
|15||Faegre Benson Hobson|
|15=||Shepherd + Wedderburn||9|
|19=||Simmons & Simmons||8|
|Top three deals in 2004|
|Issuer||Issuer adviser||Nomad||Nomad adviser||Amount raised||Date|
|PD Ports||Norton Rose||Collins Stewart||Norton Rose||£158m||July 2004|
|Centaur Holdings||Travers Smith||Numis||Travers Smith||£134m||March 2004|
|Star Energy||Norton Rose||Hoare Govett||Simmons||£78.2m||May 2004|