Every successful catering company reaches a stage in its development where it will consider expanding its operation – whether scaling-up production by investing in new equipment or premises, increasing its workforce, or seeking to break into new markets in the UK and abroad. But with these exciting opportunities comes the challenge of how to fund this expansion. Eoin Broderick, senior associate with Cripps Pemberton Greenish, looks at whether an AIM listing could be an option worth considering to turbo charge your growth plans…
Start-ups and early stage companies that have survived up to this stage on limited external capital provided by family members and/or angel investors are unlikely to be able to sustain their growth this way, and so will need to look elsewhere to meet their funding requirements. The traditional options of capital raises and bank lending may be available, but at this key stage in their development companies should also consider a stock market listing, perhaps alongside a fundraise. This is a significant long-term strategic play for any company, requiring large investments of time and expense, and it can bring great opportunities and long term benefits.
Most people will be familiar with the London Stock Exchange (LSE) and the FTSE 100, and as a result, might think that public markets are only for the very biggest of companies, multinational corporations and trading giants. While that is largely true of the LSE Main Market, due to the high levels of regulation and market capitalisation requirements, there are also a number of markets designed for smaller ‘growth’ companies.
The most popular of these in the UK are the Alternative Investment Market (AIM) and the NEX Exchange Growth Market, which are dedicated markets populated with a diverse range of companies, from family-owned businesses to dynamic, high-growth enterprises across all sectors. The entry criteria for these markets are more generous than the Main Market: there are no minimum share capital requirements and the company does not need an existing track record. This makes the markets riskier prospects for investors but opens them up to companies at an earlier stage of their lifecycle.
So, what are the benefits of listing on one of these markets?
- Access to a wide and diverse body of investors, such as institutional investors, retail and international capital which would not otherwise be available to the company
- Increased public profile, which in turn can provide leverage in negotiations with lenders and trade creditors
- Creation of a market for the company’s shares, which may provide an opportunity for early investors to realise some of their initial investment and potentially allow the company to make key acquisitions using its shares as currency rather than needing to raise the cash
- Enhancement of your relationship with your investors, shareholders and other key stakeholders by showing the company’s ambition for growth
There are a number of high profile companies in the food and drink sector (for example, Hotel Chocolat and Fevertree) that have taken this step in their development and there is no reason why this number will not continue to grow.