6 May 2008
Norton Rose has powered its way to the top of the AIM rankings in a little over two years on the back of its work in the natural resources sector. The firm topped the chart of law firms by total number of AIM clients, AIM 100 clients and by market capitalisation in the latest quarterly figures published by Hemscott. And this was despite losing three from its AIM roster between January and April this year.
In the constricted post-credit crunch environment, firms with the ability to focus on areas of the market where deal activity is still frequent are leading the way. Norton Rose has benefited from its reputation in the oil, gas, minerals and renewable energy sectors - all of which have defied the economic downturn.
"A lot of what we have done is driven by working with companies in natural resources," says corporate finance partner Stephen Rigby. "Demand for minerals has been very strong in the past two to three years. It's made people more willing to do deals in the sector."
The firm represents clients such as chrome and nickel producer Oriel Resources, which mines in Russia and Kazakhstan, and UK-listed Chinese company Prosperity Minerals. Norton Rose also enjoys close links with the City advisers that facilitate AIM flotations. "We have close links with the investment banks and brokers. You have to know the [nominated advisers]," says Rigby.
While natural resources performed strongly, the rest of AIM is no longer the vibrant marketplace it once was. In January this year the FTSE AIM All-Share Index fell below the 1,000 mark at which it opened in 1995. For law firms specialising in small-cap advice, the immediate future is far from rosy.
Macfarlanes corporate partner Kevin Tuffnell admits: "Clearly there's some activity, but not a lot."
The top performers in the latest Hemscott tables have used their international networks to keep ahead of the pack. The top five is rounded out by DLA Piper, with 61 AIM clients, followed by Pinsent Masons, LG and Eversheds - the same five in virtually the same order as the last rankings released three months ago.
Only Eversheds has moved, slipping from joint fourth to fifth place, with 49 AIM companies on its books. The firm has gained only one client on the junior market since mid-2006, when it was the top AIM adviser.
Back then its practice was boosted by corporate rainmakers Stuart Fleet, Chris Garnett and Rob Pitcher, who brought in three new clients in 12 months. Both Fleet and Garnett have since left - Fleet to Kaye Scholer in November 2006 and Garnett to Shoosmiths in April of that year. Whether by coincidence or not, the firm has yet to hit such heights again.
Further down the table, Cobbetts managed to secure six new AIM clients, taking its tally to 30 and making it the fastest-growing firm in the table. Among those added in the last quarter were Newfoundland-based Enegi Oil and Panceltica, the first IPO out of Qatar.
Head of public markets Andrew Wright put the success down to a focus on basic materials, saying: "I spend a lot of time travelling the world extolling the virtues of AIM. We've grown considerably."
DLA Piper, meanwhile, has cemented its place in the top two by cashing in on the increasing number of foreign companies seeking to trade on AIM.
"AIM is an important part of our business and there are still a lot of opportunities for companies seeking to come to AIM from the international market. Our overseas coverage is second to none," insists corporate partner Charles Cook. "One of the things we've been working on is building a corporate finance capability in each jurisdiction."
The firm added two clients to its AIM roster in the last quarter, including China-based China Eastsea Business Software in March. That month also saw the first Korean company to be listed on AIM, when Morrison & Foerster helped medical technology developer BHK with its IPO.
AIM is attractive for expanding foreign businesses for several reasons - not least because of a faster and less restrictive route to flotation than in the US.
There are now some 500 foreign companies on the junior market - and they are outperforming their UK counterparts.
"That trend will continue. It's quite an attractive market and it's getting more well known," says Tuffnell at Macfarlanes.
The legal rankings for the AIM 100, which unlike the AIM 50 includes foreign businesses, reflect this international outlook.
Alongside Norton Rose at the top of the AIM 100 table is Isle of Man-based offshore firm Cains, which used its tax haven status to attract six top 100 clients. They were joined by DLA Piper, Ashurst and LG in the top five. Significantly, all of those firms bar DLA Piper lost AIM 100 clients in the last quarter.
Even considering the high turnover of AIM clients to M&A activity or promotion to the main market, this seems like a sign of things to come.
One strategy to beat the downturn is to become more selective about taking on AIM mandates. Macfarlanes has enjoyed some success with this approach, taking third and fourth place in the AIM 100 and AIM 50 rankings respectively, despite having shown little interest in targeting the junior market.
Tufnell says AIM falls into the firm's broader strategy of representing the biggest players in any sector. Macfarlanes helped financial services company Just Retirement launch on AIM in 2006. "When it was floated in November 2006," says Tuffnell, "it had one of the largest market capitalisations on AIM. That would be our target market."
The ;fact ;that ;a ;corporate heavyweight such as Macfarlanes is showing an interest in AIM is testament to how far the market has come since it was launched back in 1995.
The largest AIM companies are now on a par with those listed on FTSE, with similarly exacting standards on corporate governance, as ;the ;Just ;Retirement ;IPO demonstrated.
"That IPO was conducted on AIM, but it was almost as if it was going on the full list," notes Tuffnell.
A selective approach to AIM looks the best approach as the crisis in the global markets takes hold. There will undoubtedly be fewer IPOs, fewer acquisitions and fewer requests for shareholder capital in the next quarter.
But, as Rigby points out, for the right businesses in the right sector there is still money in the junior market.
"It's hard to raise money for IPOs, but there is activity," he insists. "Companies are raising money, but they're good-quality companies backed by shareholders at sensible prices." nIn February 2007 Canada's Fasken Martineau merged with London-based Stringer Saul with the intention of targeting AIM clients.
top firms by Total AIM clientsRank Rank Firm No of clients No of clients first previous first previous quarter quarter quarter quarter top firms by AIM 100 clientsRank Rank Firm No of clients No of clients first previous first previous quarter quarter quarter quarter Top 10 firms by AIM market capitalisationRank Rank Firm Market cap Market cap first previous first quarter previous quarter quarter (£bn) quarter (£bn)
#cains: able on aim
The presence of offshore firm Cains at the top of the rankings for AIM 100 clients is testament to the increasingly global nature of the market.
Companies registering in the Isle of Man enjoy all the tax benefits associated with a zero-tax economy as well as close proximity to London.
Cains corporate director Richard Vanderplank says: "In the last few years AIM's become increasingly important. Our goal is to ensure the Isle of Man's position as the preferred offshore route into the London markets."
The firm has benefited from the growing number of companies from BRIC (Brazil, Russia, India and China) economies seeking to list. It is set to open an office in Singapore in July, further bolstering links with India and China.
Major clients on its roster of six AIM 100 companies include Indian media group Eros International and United Arab Emirates-based Lamprell.
Foreign businesses often instruct Cains on the offshore aspects of IPOs alongside a larger firm for English company law.
"We see ourselves working in partnership with City firms and think it works very well," says Vanderplank.
#Fasken and Stringer stake AIM claim
Stringer managing partner Norman Ziman said at the time that the deal with Fasken made it "well placed to reap the benefits of the continued stream of instructions in this area".
It has done just that, achieving a creditable tenth on the list of firms by total AIM clients.
Fasken's traditional strength is in mining, which has defied the economic downturn and remains the single largest sector of companies listed on AIM. Stringer has benefited from the international coverage of Fasken, with offices across Canada as well as in New York and Johannesburg.
The collaboration was rewarded shortly afterwards when Fasken Martineau Stringer Saul utilised its global reach to advise Pan African Resources on its dual listing on London's AIM and Johannesburg's AltX.
Last year the firm also boosted its AIM practice by hiring former Eversheds partner Nicholas Narraway from Kerman & Co. Narraway specialises in advising smaller quoted companies on flotations and associated transactions as well as on general M&A.