Choosing the right Nomad

Source: Stock Market Digital

Date :29/05/2007 12:27:40

Chilton Taylor looks at the factors involved in choosing the right nominated advisor for an AIM listing

When choosing the right nominated adviser (Nomad) to help undertake an AIM listing, two statistics from Baker Tilly’s annual Taking AIM survey always come to mind: firstly, the most important piece of advice AIM company directors could offer companies who are considering an AIM-flotation is to choose a nomad carefully. It is advice, perhaps, that many offer in hindsight; the second statistic is that only 41 percent of respondents claim to be completely satisfied with their current Nomad.

The importance of the role played by your Nomad is difficult to overstate. Nomads, brokers and other advisers play a central role in your company's admission to AIM. While you can be assured that your Nomad will be able to demonstrate expertise, it’s vital that your chosen adviser is capable in the areas where you will rely on him or her. Remember not to get too distracted by anything that doesn’t facilitate raising the capital. Raising the right amount of capital is a massive enabler for your future strategy. Above all other considerations, make sure you’re satisfied you will raise the full amount you need.

Often, in the rush to appoint a Nomad, people neglect the first important question – are you better off with a separate Nomad and broker? Most investment banks have both. There is a case to be made that since brokers’ principal clients are institutional investors, a separate Nomad is freer to advise on the best price for your company, but inevitably the price to be paid on a new issue is decided by the institutional investors themselves and not the acting broker. Therefore in most cases where it is vital that new funds are to be raised on IPO to develop the business, it is perhaps the broker’s ability that should be chosen in preference to the Nomad.

This leads to the question of exactly how much you really need to raise. You will have been made aware of the importance of preparation and planning for AIM flotation, here is where you really need reliable figures from your business plan. Some investment banks position themselves as specialists for deals involving very large sums where others prefer to specialise on smaller amounts, your business plan will almost pre-determine the type of investment bank you should approach. This will be new territory for most companies but I strongly urge consulting a specialist AIM accountant who is familiar with the preferences of the investment banks and who would be more than happy to point you in the right direction.

Your Nomad’s sector expertise is an obvious but crucial area for consideration. Investment banks have analysts but not all cover every sector. You should be confident that your analyst’s views are respected by investors. Analysts really add value when presenting good research notes to position your company to the market.

The relationship with your adviser will often have to be stronger than with normal professional service providers. This is because you will be working very closely together over a period of several months. The admission process is undoubtedly a stressful period, but an adviser you trust, have a good chemistry with and who has a clear brief of what you want will make it much more manageable.

Crucially, your advisers will demonstrate that they understand your business and understand what it is you wish to achieve with it. There is a conversation you need to have early on with your Nomad to identify the issues you consider to be deal breakers and how you will recognise them.

Along with your company’s directors, your Nomad is responsible for ensuring that your business adheres correctly to AIM's rules and regulations, keeping up with AIM Notices and rule revisions. Conversely, you need to make a concerted effort to keep your adviser up-to-date with what’s happening inside the business, ensuring there is no mismatch of objectives.

Like the listing itself, choosing your Nomad is not an end, but a beginning. Time spent now, will make it less likely you’re among the 41 percent of company directors who wish they’d chosen more wisely.

Chilton Taylor is Head of Capital Markets at Baker Tilly