Fall 2007 issue of Horizons

INTERNATIONAL NEWS Baker Tilly International (cont.)

• consider the introduction of share option or employee incentive schemes to motivate, reward and lock in key staff. Take advice on the various schemes available • consider the group structure – are there some operations that should not be listed or do not form part of the core activities of the group? Should a new holding company be formed? • are all taxation matters up to date and fully complied with? In particular is there compliance with VAT, PAYE and corporation tax • take steps to ensure the commercial criteria in respect of customers, suppliers and staff are met as discussed above • review and update insurances – in particular it may be necessary to consider key man policies for certain directors. Preparation Companies seeking a listing must not only be suitable to gain admission to AIM but must also be ready. A typical listing process takes around three months but some companies may take up to two years to become ready for listing. There can be no IPO without full financial and legal due diligence so it is worth preparing for this. Above all it is essential that a company has prepared a robust business plan supported by a detailed financial model (integrated profit, cash flow and balance sheets) which can be easily flexed for sensitivity analysis and which can support the new funds to be raised on IPO. Steps to flotation Having met the suitability and preparation tests a flotation is a disruptive time, in particular for the directors and especially the finance director or CFO. Long hours in meetings will be necessary and the board needs to ensure that the underlying business is still run efficiently during this time. It is therefore essential that the board also chooses advisers who are experienced in this field, can identify key issues early and provide a solutions driven approach.

The steps to flotation are: • preparation as discussed above • choosing advisers • due diligence process – commercial, legal and financial • research note preparation • preparation of admission document • marketing to investors • admission Advisers The board will need to choose; reporting accountants, lawyers, a nominated adviser (Nomad) and a broker. Also required are financial PR and printers and registrars. The Nomad is a role particular to AIM – effectively the Nomad is responsible to the London Stock Exchange to determine whether a company is suitable for admission. The Nomad advise the directors on their duties and the AIM Rules, coordinate the admission process and draft the AIM Admission Document. The Nomad is usually (but not always) from the same firm as the broker who importantly arranges presentations with institutional investors and is effectively responsible for raising the required funding. AIM has become the most successful growth company market in the world because it has struck an appropriate balance of regulation which has attracted both companies and investors.

Reprinted from "Insight", Summer 2006, a newsletter of BakerTilly International.

7 u winter 2007 issue