However, in times of economic strife the task is made even harder. The IPO route is all but shut to most companies says Catherine Moss, partner at law firm Fasken Martineau, with market turbulence making the move as difficult as it has ever been.

Moss explains: ‘I think the market is pretty shaky for both equity and debt right now, and at the moment it is pretty much closed on the IPO front, even for mining companies.’

The fact that the market appears blocked for mining businesses is one which surprises Moss, as most of the movement she has seen over the past few years has involved issues that have gone out on the mining side.

Fasken Martineau was part of the team which saw oil and gas firm SacOil list on AIM through a fast-track introduction in April.

The South Africa-based commodities business listed on the junior market while still maintaining its position on the Johannesburg stock exchange.

DIFFICULT DEALS

Nigel Gordon, partner at Fasken Martineau, adds that although the listing was not about raising funds, the deal was difficult due to the dynamic aspect of the business.

The ability for listed companies to draw down additional capital through secondary fundraisings is another aspect of market activity which Moss sees as struggling.

‘Secondaries are hard, but they are possible if you have a good story and are an established company,’ she explains.

Moss believes that businesses wanting to raise additional funds must present the case that they are a truly profitable business or are seeking an acquisition that will drive the business forward. Additionally, she says, the company must have a good track record of delivering for investors.

However, she adds that even that might not be good enough given the current state of the market, with new issues finding the going very tough.

Examining other forms of finance, Moss points towards more complex forms of funding structures as alternatives to the status quo.

She explains: ‘Either you have to take debt from commercial banks, if that is available, or you do some form of vendor financing where the vendor in part supports the acquisition of the asset, or takes a stake in the listed company.’

It is a more difficult deal to get done, Moss adds, but one which can be achieved in the current climate.

CAPITAL ALTERNATIVES

Looking forward to the next six months, Moss believes that the first port of call needs to be sorting out the problems with Europe. Once the global funding market on both sides of the Atlantic has settled, the large IPOs need to start reappearing with senior investors coming in and buying up, she adds.

While London is still a very comfortable regime to come into for businesses, Moss says that that there are alternatives to a listing in the capital.

Moss comments: ‘It does depend on whether they get the right rating here, and whether or not they are being covered properly and effectively.

‘If a business is in a sector which could quite easily go to the Far East, there is the possibility that the location may offer them a better return and prospect. I think it is more for some of the commodity and consumer related sectors.’

Catherine Moss
Partner
Fasken Martineau
Tel: 020 7917 8533
Email: cmoss@fasken.com
Web: www.fasken.com