Q.I would one day like to float my company, what steps should I implement to prepare for this?
A.Before you list on a stock market like Aim you have to be assessed by a nomad, a nominated advisor such as an investment bank, corporate finance firm or accountancy firm. The nomad will look at your company’s structure, its board, each of its directors, any potential advisors and assess whether the firm will enhance the reputation of the market and offer real value to shareholders. You have to pass this assessment before you can list. Due to this, it’s worth getting your house in order before you go through the process of trying to float your company. Stephen Hamilton, corporate finance associate at law firm Mills & Reeve, says that the first thing a company should do is take a look at its board structure: “Before any company can float it will need directors on the board with plc experience and some independent non-executive directors on top of that.”
Q.How often should the board meet?
A.Hamilton says that usually the minimum number of directors on the board of a listed company is four, which should also be the target number for firms that have yet to list. He also recommends that a board meets at least once every couple of months, and the smaller the board the more regular the meetings. You also need to have a strong remuneration policy for the board. “Executive directors, those that work for the company, should have pay that is linked to the performance of the company, whereas non-executive directors should not have their pay determined on the performance of the firm. The idea behind this is that non-executive directors will then be able to take decisions without thinking about the short-term success of the company.” The nomad will also look for strong management and risk controls, so robust risk systems should be in place.
Q.What sort of performance does my company need to show before I can list?
A.Expect the nomad to scour through your balance sheet looking for at least three years of sustained growth. Ebitda, gross profits and margins will all be analysed to see if the company offers growth potential and real value to shareholders, writes Colin Aaronson, director of capital markets at Grant Thornton, in A Guide to Aim, published by the stock exchange. Nomads will also want to see sales forecasts and proof that your company compares well with its peers. Aaronson also writes that companies should expect their accounting standards to be scrutinised to ensure that they are in line with the best practices. “The fundamental question that a nomad should ask is whether the prospective AIM company has a sustainable competitive advantage that can be further exploited to create shareholder value,” writes Aaronson. For example, patent copyright or another form of intellectual property protection. For more information see: http://www.londonstockexchange.com/companies-and-