The opinions were voiced at the AIM v Private Equity seminar, hosted by accountant Baker Tilly. Other important issues raised from a delegate survey conducted at the event were exposure to investors, acquisition currency and share options schemes.
Of those considering private equity as a route to growth, the most important AIM v Private Equity issues were retaining control and availability of funds. The biggest concerns about raising private equity funds were loss of control, pressure to achieve results and the exit strategy.
Investment manager Brewin Dolphin’s head of corporate finance, Mark Brady, told M&A: “The costs of listing on AIM have been reasonably static in recent years, with the commission rate, usually about 4 – 4.5 per cent, being the largest variable cost.”
He suggested that to keep listing costs down an entrepreneur should “agree engagement terms and abort costs first, it’s also important to get fixed quotes from advisers and stick to them.”
Brady added that the cost of listing, usually some £500,000, is “a one-off charge, differing from a private equity investment that often carries follow-up costs such as loan notes. Private equity firms can take a large stake of a company, or sit on the board as a non-executive director and take a degree of control in a draconian manner.”
Peter Armitage, from Leeds-based private equity fund Key Capital Partners, said at the event that because of private equity’s bad press his children had started telling their friends that he was an estate agent.
Armitage pointed out that £500 billion had been invested in UK companies by private equity firms between 2000 and 2005. He stated: “You can buy almost any UK company now – Boots was bought by private equity and Sainsbury’s was a target.”