Graeme Bruce: Medium-sized businesses should 'Aim' for float

Having recently concluded two of the latest successful Scottish Aim transactions - the flotation of Smart Metering Systems (SMS), and the placing of 165 million shares for shipping logistics company InterBulk - I would go further and say it's time for Scotland's medium-sized enterprises (MEs) to revisit their relationship with Aim.

SMS's admission to Aim is expected to help secure access to an additional source of capital to fund its growth plans.

The placing was oversubscribed, a real success in current turbulent times. This was down to investor appetite for stakes in a business with real tangible assets, proven management track record, proven record of profits and a workable vision for future growth.

SMS is the only independent UK provider of the full range of gas infrastructure connection services and smart metering and a company of this nature with physical output is considered by many to be more robust by nature than, say, dot com businesses.

SMS will be better placed to raise further capital as necessary to meet the elevated levels of demand for a competitive smart metering solution with their innovative offerings.

The June placing for InterBulk raised 18.5 million. This involved a "cash box" structure used to secure an international cornerstone investor in Sinotrans, the Chinese shipping powerhouse - a partnership which will facilitate future growth of the group in the key Asian market - but at a placing price almost three times its previous share price.

These two deals have been welcomed by the market. There is a misconception that achieving an Aim listing is an overly-complex and unduly-onerous process. While businesses will need to upgrade corporate governance structures, against a landscape of increased emphasis on transparency and good governance structures in business generally, many well-run private companies would be surprised how closely they already operate to Aim governance standards.

The key components for a successful float on Aim? Investors look for businesses with strong management teams with a clearly-defined and articulated strategy, a track record of successful results and potential for growth. Also, businesses that are not overly complex, which they understand and can share the vision.

What don't they like? No surprises, whether as part of the initial public offering (IPO) process or beyond. There are few businesses where at the outset everything is perfect for a float and there are no issues not suited to the public company arena.Problems that arise late on in the IPO process potentially undermine confidence in not only the integrity of the process but also in management.

The range of benefits of listing on Aim far outweighs the initial work and ongoing compliance - access to capital, achieving a potential ultimate exit strategy, funding an acquisition strategy using equity and providing a market in the company's shares.

Importantly, as displayed with InterBulk and SMS, the IPO process raises profile and reputation amongst the public, competitors, suppliers and customers. Liquidity in and demand for the shares needs to be maintained and a good communication strategy with investors is vital in achieving this.

Caution on investors' part in the market arguably mirrors the reticence of MEs to undertake this process.

For those who wish to completely exit their business, it is unlikely to be the solution. However, for entrepreneurs looking to move to the next phase in their business it is an option that cannot be ignored.

Hopefully, the momentum created by the success of newly-listed Scottish companies and positive experience of those raising new capital, such as InterBulk, will encourage others to come forward, bringing an increasing number of IPOs on Aim in the second half of 2011.

• Graeme Bruce is a corporate partner at law firm Dundas & Wilson.