For any company seeking to join AIM, the nominated adviser will be crucial. Steve Douglas from nomad and broker Arden Partners explains why.

For any company seeking to join AIM, the nominated adviser will be crucial. Steve Douglas from nomad and broker Arden Partners explains why.

When the London Stock Exchange established AIM in 1995, it outsourced the responsibility for regulating companies by creating a new type of financial adviser, the nominated adviser, or nomad. The nomad’s role is fundamental to the successful running of AIM and a company is required to retain one at all times.

The nomad has three principal tasks:
• Determining if a company is appropriate for admission
• Managing the flotation process
• After flotation, advising the company on ongoing compliance with the AIM Rules

Determining suitability for admission
A nomad decides whether a company is appropriate for admission to AIM. Equally, as a corporate finance adviser, the nomad should ensure an AIM flotation is in the best interests of the company and its shareholders.

In assessing the suitability of a company the nomad will investigate past and projected financial performance and its performance relative to its competitors and quoted peers. The nomad also reviews each director by taking references and performing detailed background searches.

Project managing the flotation process
Once a nomad has agreed a company is suitable for AIM, its task is to bring together a team of advisers, set a timetable and allocate responsibilities. The four key advisers in any flotation are the nomad, broker, the company’s solicitors and reporting accountants.

Central to the nomad’s work – and all the advisers – is preparing the AIM admission document which describes the business, its activities, financial information and the legal structure of the company.

Advising on regulatory matters
A nomad’s responsibilities continue after admission. The nomad will ensure its client has appropriate systems in place to enable it to comply with the AIM Rules, and will sometimes need to advise on the interpretation of them. Nomads also give guidance on the appropriate level of corporate governance and the form and content of any announcements.

The nomad and broker
The roles of nomad and broker are often confused, as both are frequently performed by the same organisation. The nomad provides general corporate finance advice, project manages the flotation and acts as the AIM company’s regulator. The broker raises funds from institutional clients and manages the ‘aftermarket’, publishing research where necessary and ensuring there is a healthy interest in the company’s shares and sufficient stock to satisfy that demand.

Identifying a suitable nomad
The nomad is the probably the most important adviser to any prospective AIM company and must be selected with care. A flotation can be a lengthy and arduous process and it is essential the company’s directors have confidence in their nomad and feel comfortable working with them.