London's Alternative Investment Market (AIM) has long been the home for early-stage, ambitious growth companies looking to achieve higher levels of investment than would be possible on mainstream stock markets.
More recently, however, the AIM market has become the hunting ground of deep-pocketed private equity (PE) buyers looking to spot a bargain and cash in on London's undervalued listed stock with public-to-private (P2P) deals.
In 2023, 39 deals were announced of takeovers of AIM-listed companies up from 19 in 2022, according to Mergermarket data.
"Sophisticated sponsors are well versed on the UK P2P process and can offer existing shareholders in the publicly listed target a tax efficient reinvestment into the new PE private structure," said White & Case partner Ross Allardice. "Premiums on these listed assets are relatively high and it will be imperative for these sponsors to consider forming consortiums to reach these premiums needed for funding requirements," he said.
According to White & Case partner Patrick Sarch this comes down to a combination of market confidence and the strength of US equity valuations. "The risk appetite for potential acquirers of UK listed companies has increased while boards of many potential target companies have accepted valuations are unlikely to improve in the foreseeable future and are becoming more likely to recommend offers so that the valuation gap is closing."
The full article is online here (paywall).
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