Aalto Capital's event 21st January 2010. Tim Richardson, Director, Altium Capital Andy Richards, Director, Altium Capital

1. Introduction to AIM IPOs
January 2010
Tim Richardson
30 St James‟s Square Andy Richards
London SW1Y 4AL
England
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2. Overview of Altium
 Full service, integrated and independent investment bank
 Strong entrepreneurial spirit, 100% employee owned
 Pan European footprint - network of locally staffed offices
 Focussed on high quality small and mid cap growth stocks
 Active in AIM market - registered NOMAD and Broker with 35 retained AIM clients
 Experienced institutional sales team with proven track record of distribution
– Raised over £1 billion of capital since 2005
 Market leading equity research
– 12 specialist sector analysts covering 138 stocks
Provide advice / guidance on all aspects of an IPO and afterwards as a quoted company
Further information on Altium is contained in the Appendix
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3. Introduction
 The UK IPO market effectively closed around Q1 2008
 More recently, investors have been occupied with supporting secondary fundraisings
– More than £76 billion raised in the UK in the year to December 2009
However…
 ….equity markets are recovering and a handful of IPOs have successfully completed
 Expectations are that IPO activity will increase throughout 2010
 This presentation seeks to give an overview of:
– UK stock market conditions
– Investor sentiment, particularly regarding international companies
– AIM IPO considerations and process
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4. The UK Stock Market
Comments AIM All Share Performance
1200
 Sustained rises in share prices over the last
10 months (AIM All Share up 84% since 1000
March 2009 low)
800
 Equity market volatility and IPO volumes have 600
been closely correlated historically
400
– Volatility spiked in Q4 2008 but has 200
reduced significantly since
 Anecdotal evidence suggests a substantial AIM All Share
IPO pipeline AIM Issuance vs. Market Volatility
18 90
 Underlying institutional liquidity robust 16 80
14 70
Capital markets do remain nervous but
Funds Raised (£bn)
Volatility Index %
 12 60
further successful IPOs should generate 10 50
confidence 8 40
6 30
4 20
2 10
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Market conditions / appetite for IPOs improving
New Secondary Volatility Index
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5. Press commentary
“2010 is a year of opportunity on the AIM
market… and for those considering an IPO “If 2009 was the UK's year of
getting the timing right to take advantage of the rescue rights issue, 2010 is
cash which has been hoarded in 2009 and is set to be the year of the IPO”
now looking for a home will be key” The Times, 1 January 2010
Mondaq Business Briefing, 5 January 2010
“Pipeline of new companies looking
to float in 2010 is promising”
The Oil Daily, 28 December 2009
“Strong support for secondary issues,
together with renewed confidence in the
M&A market, bodes well for the return “The availability of debt funding continues
of IPO activity in 2010” to be restricted and as equity markets are
Ernst & Young, December 2009 starting to show signs of life once more, IPOs
will be back on the agenda for many
companies”
Mondaq Business Briefing, January 2010
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6. Background on AIM
Background Market value / Funds Raised
120 18
 Exchange (not EU) regulated market
16
100
– Owned and operated by the LSE 14
80 12
– Reduced regulatory burden
Funds Raised (£bn)
Market Value (£bn)
10
60
 Designed for smaller growing companies 8
40 6
 Some perception / instability issues following bull
market excesses and recent stream of de-listings 4
20
2
– May prejudice some investors willingness to
invest and impact liquidity 0
2002 2003 2004 2005 2006 2007 2008 2009
0
Market Value Funds Raised
Market Growth Distribution by Market Capitalisation*
3000
350
2500 300 287
Number of Companies
250
2000
Number of Companies
207
199
200 190
1500
150
122 122
1000 101
100
500
50 37
8
1
0 0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0- 2 2- 5 5 - 10 10 - 25 25 - 50 50 - 100 100 - 250 250 - 500 500 - 1,000+
1,000
Market Cap (£m)
AIM Of f icial List
*excludes unvalued and suspended securities
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7. Growth critical … sector neutral
AIM Companies by Sector
Software and
Computer Services General financial
Support Services Other
Automobiles
Industrial
Transportation
Telecoms
Media Chemicals
Food Producers
IT hardware
General Retailers
Mining Construction and
Building Materials
Electronic and
Electrical
Equipment
Travel & Equity Investment
Leisure Instruments
Health
Real Estate
Oil and Gas
Engineering Pharmaceuticals
Household Goods
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8. AIM is an international market
 LSE has actively sought to internationalise AIM
 Strong constituency of international companies
– 241 international companies (19% of total) at December 2009
– Many more with a majority of their operations outside the UK
 Recent reduction in number is proportionate with general rationalisation of the market
International companies on AIM… …as a proportion of total market
2000
400
347
350
317
Number of international companies
304
1500
Number of Companies
300
250 241
220
200 1000
150
116
100 500
60
50
50
0 0
2002 2003 2004 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009
International UK
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9. AIM is an international market (cont’d)
International companies on AIM by International companies on AIM by
country of incorporation country of operation
South Africa, 3.0%
Russia, 4.2% Republic of
Republic of Ireland, 6.2%
Ireland, 16.1%
India, Rest of Europe,
Israel, 2.8% Rest of Europe, 5.4% 16.6%
9.3%
China, 10.4%
Canada, 9.3%
Israel, 2.2%
Canada,
Australia, 9.7% Rest of the World, 3.8%
42.7% Rest of the World,
Australia, 31.7%
5.6%
USA, 10.1% USA, 11.0%
 Powerflute is the only Finnish incorporated  Sunrise Diamonds cites Finland as its country of
company currently listed on AIM operation
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10. Why IPO on AIM?
Quotation on one of the Historically open to
worlds premier markets international
for growth companies companies
Access to
Enhanced profile /
London’s deep pool
credibility
of investment capital
Currency for (and easier Flexible regulatory
rules on) acquisitions regime
Increased liquidity for Facilitates recruitment,
shareholders / (partial) retention and
exit for investors incentivisation of staff
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11. But…
 IPO may only provide a partial exit
 Ongoing “Public” accountability / loss of privacy
 Cost of obtaining and maintaining a listing
 Requirement to satisfy the needs of a diverse range of external shareholders
 Management time
 Possible culture change
 Can be unforgiving environment if expectations not delivered
AIM will not suit all companies
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12. Our investors’ current focus
• Credible growth story and committed management team are essential
Equity Story • Strong track record through the current recession – fundamentals back in focus
• Visibility of earnings and ability to deliver post IPO expectations
• Simplified capital structure
Capital Structure • Conservative levels of gearing
• Management incentivisation and alignment of interests
• Preference for primary capital raisings – funds to supports the equity story
Offer Structure • Longer lock up periods
• Sufficient aftermarket liquidity / size of free float
• Negligible institutional appetite for very small issues
Operational Scale • Sizeable potential / existing market
• Overseas companies will need an international / potentially international business
• Material IPO discounts likely to be the norm until market fully recovers
Valuation
• Overseas companies may attract an additional discount
Appetite for high quality stocks at the right price
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13. Conditions for listing on AIM
Regulatory  Must comply AIM Rule book published by the LSE
Framework  Regulatory supervision delegated to Nominated Adviser (NOMAD)
Public Shares  No minimum free float
Track Record  No minimum period for financial statements
 Admission Document (Prospectus Directive lite) - description of business,
Documentation investment rationale and financials
 No requirement for regulatory approval of documents
 NOMAD to be retained at all times
Advisers
 Broker to be retained at all times (N.B. can be combined with NOMAD role)
Investor requirements may materially add to purely regulatory conditions
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14. Other issues to consider
• Ability to effectively manage the IPO preparations
Management • Willingness to commit to the company post IPO
• Ability / availability to communicate effectively to UK based investors
• Is the current corporate structure appropriate for a listing?
Legal Structure
• Consider using PLC Topco to mitigate any investors‟ concerns
• UK standards of corporate governance will be sought
– Effective compliance with Combined Code
Board – Focus on „best practice‟
• UK based non-executives can provide local presence / market knowledge
• Is the track record robust – sharp uplift pre IPO may be treated with suspicion
Financials
• Are operational, financial and management systems suitable
Recognisable internal and regulatory structures will reassure UK investors
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15. IPO process and timeline
 IPO process typically takes place:
– in four key sequential phases
– over a period of 3-5 months, with an intensive marketing phase lasting 2-4 weeks
Marketing &
Preparation Due Diligence Documents
Admission
 Assess suitability of  Decision taken to  Admission Document  Research
IPO route proceed
 Short form report  Institutional roadshows
 Appointment of NOMAD  Accountants‟ reports
 Institutional  Bookbuild & firm
 Preliminary valuation  Legal due diligence presentation valuation
 Review of:  Commercial due  Pre IPO research  Admission
– Corporate structure diligence, as required
– Financial
requirements  Working capital review
– Employee
incentivisation  Ensure appropriate
– Investor procedures for
expectations company and directors
 Test marketing, as
appropriate
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16. Key Continuing Obligations
• Timely and accurate disclosure of information required
Price sensitive • Must inform the market as soon as possible of any price sensitive information
information • Announcement if potential leak about negotiations of a price sensitive nature
• Half year report within 90 days of the half year
• Publish accounts within 6 months of period end – preliminary announcement usual
Financial reporting
• Additional trading updates the norm
• Website disclosures
• Class tests referenced to gross assets, profits, consideration and gross capital
Transaction
• > 100% requires shareholder approval
disclosures
• Process requires a circular - cost and timing impact for acquisitions
• Directors must not deal during „close‟ periods
Dealing restrictions
• Internal dealing code to be introduced
• Vital that management maintain profile and stimulate interest in shares
Investor relations • Year round IR planning including institutional roadshows, site visits and marketing
• Share register analysis and new investor targeting
Controls in place to ensure compliance with the AIM Rules
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17. Summary
 IPO window expected to open more fully during 2010
 AIM provides an attractive market for quality growth businesses
 Size / Quality / Valuation will be key in obtaining investors‟ attention and overcome any
prejudices against AIM
– Good quality companies with a strong growth story properly priced and structured
 Investors will be more discerning and less willing to „take a view‟ in the early stages of the
recovery
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18. Appendix
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19. Fully Integrated Investment Bank
Investment Corporate
Banking Broking
Market
Sales Making
Equity
Research
Full service offering
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20. International Footprint
London,
Manchester,
Edinburgh
(71 employees)
Hong Kong, Shanghai, and
Taipei*
Paris
(31)
Los Angeles, New York, San Madrid
Francisco (12)
Bahrain
Zurich,
Munich, Milan
(34)
Athens
Belgrade, Sofia, (6)
Bucharest, Vienna
* Associated Offices
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21. Approach
 Regular dialogue with key institutions
Sales / Trading  Commitment of capital to support liquidity
 Excellent placing power
 Company-specific research and wider sector pieces
Research  Direct feedback on institutional trends and attitudes
 Continuous dialogue with the market
Chinese Wall
 Advice and guidance on regulatory responsibilities
Corporate Finance
 M&A: 165 transactions (£12.9bn) completed since 2005
Advice
 Capital Raising: c.£1.1bn raised for public companies since 2005
 Proactive advice on all market facing issues
Corporate Broking  Selective investor targetting
 Coordination and execution of IPOs, secondary placings, vendor placings etc.
 Liaise with PR to develop an investor relations calendar
Investor Relations  Coordination of regular or one-off road shows
 Market reports to suit client requirements
Registered NOMAD and Sponsor
35 corporate broking clients, including 8 new wins during2009
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22. Sector Focus
Current Equity Research Coverage
Technology Support Services Leisure Capital Goods
Software Recruitment Restaurants and Pubs Electronic & Electrical
Hardware FM Food Equipment
IT Services Social Housing Beverages Industrial Engineering
Telecoms Construction Services Gaming Aerospace
Distribution Cinemas & Nightclubs Defence
Retail Speciality Financials Media
High Street Asset Management IP
Online Wealth Management Marketing Services
Brands Specialist Lenders Publishing
Specialist Brokers Training / Events
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23. Highly Rated Securities Operation
Equity Research
 12 specialist sector analysts covering 138 stocks
 Regular research product distributed to an established
audience of institutions and potential investors:
– Daily updates in morning meeting notes
– Company specific notes
– Sector specific / thematic notes
– Monthly research publication “Altimeter”
– Weekly economics products
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24. Highly Rated Securities Operation
Distribution Strength
 Strong and very experienced sales force dedicated purely to mid and small cap stocks
Participants in recent Altium equity placements
 £174m raised in last few months from a strong list of institutions
£40.0m placing and the £80.8m placing and Open £15.9m acquisitions of UK Fire
acquisition of RSM Bentley Offer £37.5 million Firm Placing,
and Igrox and £28.0m
Jennison for £76.3m Placing and Open Offer fundraising
Altium acted as joint bookrunner and joint Altium acted as joint bookrunner and joint Altium acted as Joint Sponsors, Joint Altium acted as financial adviser and broker
underwriter to the Company underwriter to the Company Financial Advisers, Joint Bookrunners, Joint to
Brokers and Joint Underwriters to the the Company
Company
ENNISMORE
Strong and motivated sales team with excellent mid and small cap relationships
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25. Full Range of Public and Private M&A Capabilities
● Public takeovers, buyside
or sellside (“Rule 3”) Buyside Sellside
 
Public
● Management-backed
“public to privates”
● LBOs/MBOs of private
companies
 
Private
● Trade acquisitions and
disposals
● Pan-European network of
Altium offices
supplemented by
international associates
£3.1bn of UK acquisitions and disposals since 2005
£9.8bn of Pan-European acquisitions and disposals since 2005
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26. Leading Adviser to Private Equity
Powerleague Group plc £42.5 million
£35 million Management £65 million sale to £248 million sale to £33.3m Public to Private recommended offer by
buyout led by Angus Newco Limited, a backed by Caspian Bidco Limited,
£42.5 million
company backed by a company funded by
take private by Patron
the Alchemy
Sports Leisure S.A.R.L.
Investment Plan
Deal EV £85.5m
Altium acted as
Altium acted as Financial Adviser Financial Adviser to Miles 33 Altium acted as Altium acted as Financial Adviser Altium acted as Financial Adviser
to Lloyds Development Capital and Its majority shareholder Nominated Adviser to Inspicio Altium acted as Financial Adviser to to management and BidCo
Patron Sports Leisure S.A.R.L of Inventive Leisure plc
Close relationships with private equity across Europe a company backed by
Management buyout
led by
BoSIF Extensive experience acting on behalf of VCs and portfolio companies £53 million
recommended cash offer
Terms undisclosed
for
Leverage network of contacts to source backing for corporate clients
Altium advised Vernacare
shareholders Altium acted as exclusive
financial adviser to 2e2 Ltd
£52 million Acquisition of a Acquisition of a majority £99.6 million
Secondary management £200 million
Management buyout majority stake in stake in Management buyout buyout led by Management buyout
backed by backed by
led by
Terms undisclosed
in an owner‟s buyout Terms undisclosed
Terms undisclosed
Altium acted as Rule 3 Altium acted as exclusive Altium acted as Rule 3
Adviser to Premier Asset Financial Adviser to the Altium acted as exclusive Adviser to Altium acted as Financial
Management shareholders of dress-for-less Financial Adviser to the Sellers Computer Software Group Adviser to Apollo Lifts Altium advised management
50 private equity transactions across Europe since 2005
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27. Important Notice
Altium Capital Limited, 30 St James‟s Square, London, SW1Y 4AL
Tel: +44 20 7484 4040 Fax: +44 20 7484 4144
This document is issued by Altium Capital Limited (“Altium”), which is authorised and regulated by the Financial
Services Authority and is a member of the London Stock Exchange. The contents are based upon sources of
information believed to be reliable but no warranty or representation, expressed or implied, is given as to their
accuracy or completeness.
Altium provides two types of services: Corporate Finance and Securities. Corporate Finance services are provided to
all types of customers depending on their needs. Securities services, which includes research, are provided to
eligible counterparties and professional clients (i.e. market professionals). Retail clients must not therefore rely on
any part of this document, which may include Securities related services or products and should note that Altium‟s
Securities advisory services are not available to them.
Any opinion expressed in these documents reflects our judgement at the date of publication and neither Altium nor
any of its affiliated or associated companies nor any of their directors or employees accepts any responsibility in
respect of the information or recommendations contained herein, which are subject to change without notice. This is
not an offer, nor a solicitation, to buy or sell any investment referred to in this document. The material is general
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