Firms outside the magic circle have been making a comfortable living off AIM-listed clients in recent years as the total number of companies on the exchange has grown beyond the number on the London Stock Exchange’s (LSE) main market. But the sheer size of AIM-listed entities has also grown, with £500m IPOs now common.
DLA Piper head of Europe, Middle East and Africa capital markets Alex Tamlyn said: “In the past five years AIM has moved from small cap to a serious mid-market player by global standards.”
BLP head of corporate finance David Collins agreed, saying: “Larger AIM companies are bigger now than a lot of main list companies.”
AIM 100 starNorton Rose has been one of the main beneficiaries of this boom, advising seven FTSE AIM 100 clients with a total market capitalisation of almost £3bn. This places the firm at the top of Hemscott’s new AIM 100 league tables for firms handling English law work, although Isle of Man firm Cains tops the list by virtue of its advantageous tax location for many AIM vehicles.
Norton Rose also tops the table for the total tally of AIM clients with 64, which have a total market capitalisation of £6.6bn. The firm’s strength is partly a result of its focus on its five ‘Headlights’ practice areas, including the resource and energy sectors that are a close fit for AIM, the home to a large number of such companies.
Norton Rose acted earlier this year on raising an additional £279m for Anglo-Russian mining company Aricom, one of the firm’s biggest AIM clients. However, Aricom is now transferring to the FTSE main market.
Katanga Mining’s £1bn purchase of AIM-listed Nikanor on 6 November is also illustrative of the growth and mobility of AIM companies. The two companies are advised by Norton Rose and Linklaters respectively.
Magic circle gatecrash”We’ve noticed the larger firms getting involved in AIM more than ever before, generally at the top end,” said DLA Piper’s Tamlyn. Indeed, Linklaters has made it on to the list of AIM 100 clients’ market capitalisation in tenth position, just ahead of Freshfields and A&O.
However, the larger firms generally spurn the smaller work and make no appearance on the league table of total AIM clients.
The bigger firms on AIM are not targeting AIM work directly, but more and more banks and clients in sectors or regions of interest to the big firms are flocking towards AIM.
Macfarlanes finds itself in a similar position in joint seventh place in respect of AIM 100 clients, but with far less visibility in total AIM work. Head of corporate Simon Martin corroborated this and said the firm is not consciously focused on winning AIM work, but if it is invited to pitch by existing clients such as investment banks, it does.
The long tailBLP, DLA Piper, Eversheds, LG, Norton Rose and Pinsent Masons, on the other hand, each have between 47 and 64 AIM clients, which also translates across into prominent positions on the AIM 100 table.
While these firms clearly benefit from the few larger AIM 100 deals, they also see fees generated by the ‘long tail’ of work for a great volume of smaller AIM entities.
For example, LG has five clients in the AIM 100 with a total market capitalisation of around £2.6bn, but all of LG’s 47 AIM clients together amount to a market capitalisation of almost £7.2bn.
Often more individually profitable work also comes out of smaller AIM clients as they mature.
LG recently acted on a £303m secondary fundraising for Dolphin Capital Investors, which originally listed for only £70m in 2005.
Corporate partner Tim Casben said: “We’re beginning to see clients moving up to the full list.”
BLP, DLA Piper and Pinsents are in a similar-sized boat, mixing the big and the small, and like others in their league have also seen the benefit of overseas offices providing some work among the rush of foreign companies to list on the LSE’s alternative offering, which is subject to less regulation and which has tax advantages.
Conversely, firms such as Eversheds and smaller City AIM specialist Memery Crystal have large numbers of smaller, homegrown AIM clients, but lack the big names of the AIM world.
In spite of the differences in approaches, one thing unites all of the above firms: while AIM is unlikely to become the staple diet of the magic circle, it can no longer continue to be viewed as the poor cousin of the LSE’s main list; it is becoming a stock market in its own right. And that also goes for the fees it can bring in for the law firms working on it.