London Calling

The London Stock Exchange (LSE) allows companies to raise capital from the Main Market and the Alternative Investment Market. Investors may raise capital in these markets through listing shares, debt or depository receipts.

Directors of the company need to consider its suitability for a listing, including how this aligns with the company’s ambitions. Given the cost and time associated with an initial public offering (IPO), companies need to be very thorough at this stage.

The company must be a single group structure, thus reducing minority interests as well as ensuring that the company at the top of a group is the type that can be admitted to a public market.

If a company floats on AIM, it is subject to LSE’s AIM Rules for Companies, and if there is a public offer, the Prospectus Rules. Conversely, if it floats of the Main Market, security listings are subject to the UKLA Listing Rules as well as the Prospectus rules.

After deciding to float, an advisory team needs to be appointed, typically consisting of:

• After deciding to float, an advisory team needs to be appointed, typically consisting of:
  
  
• A corporate finance specialist to act as sponsor or lead manager;
  
  
• A nominated adviser ('Nomad'), to manage the IPO process and coordinate other advisers (only for AIM);
  
  
• A broker, advising on market conditions and promoting shares to investors;
  
  
• Legal and accounting specialists;
  
  
• PR consultants to manage the brand / reputation of the company.
  
  

Alican Babalioglu / Salans

This team prepares the prospectus or admission document. This is a lengthy process which requires due diligence. Generally, the less known about the jurisdiction the business is located in, the more thorough the broker will require the team to be, so that investor interest is optimised.

The company and capital structure suitability for a listing should be assessed and if changes need to be made, should be made very early in the IPO process. Usually a holding company, which would own the shares of the company proposed for listing, is incorporated. The jurisdiction of the holding company depends on tax considerations.

The structure of the company should comply with relevant corporate provisions otherwise it will struggle to attract investment from UK institutions. It is recommended to appoint independent non-executive directors as well as evaluate the management team as the listing process begins.

Main Market vs. AIM

Contrary to belief, AIM is very well regulated, firstly by the LSE, which in turn is regulated by the UK Financial Services Authority. A central feature of the regulatory system is the delegation of responsibility to Nomads, who assess suitability and monitor compliance to the AIM Rules. A summary of the differences:

	MAIN MARKET	AIM
Shares	25% of the class of shares to be listed must be in public ownership at he time of admission	No such requirement
Accounts	Companies must have filed audited accounts covering at least three years	No trading record requirement
Value	Expected aggregate market value of all shares to be listed must be at least GBP £700 000	No minimum requirement, though the costs involved in the IPO process dictate a company should be worth several millions of pounds in order to be cost effective
Prospectus	Prospectus must be approved by the UKLA	Provided it is not an offer to the public, admission documents do not need approval from either the UKLA or the LSE, vetted by Nomad
Timetable	3-4 months prior to admission date	No standard time table. Time based on individual circumstances and market.