New research from Moore Stephens, the Top Ten accounting and advisory firm, has revealed that the average enterprise value of technology companies on the Alternative Investment Market (AIM) has reached £88.9m – a 21.3% increase from 31 December 2016 and a 51% increase since the Brexit decision.
Moore Stephens’ ‘Tech AIM Barometer’ revealed there was only one tech IPO on AIM over the six month period to 30 June 2017 – Ethernity Networks – down from eight in 2016 and seven the year before. Moore Stephens believes was due to a combination of factors, including the political and economic uncertainty caused by Brexit negotiations and, to a lesser extent, the recent General Election.
Commenting on the research, Dougie Hunter, Associate Director at Moore Stephens, said: “The fewer number of IPOs can be explained by a combination of factors that of course includes Brexit and a General Election, but also the fact that many private equity firms are choosing outright sales through secondary buyouts rather than exiting through IPO.”
Despite the lack of tech IPOs on AIM, Moore Stephens’ Tech AIM Barometer has revealed that more than £275m was raised from secondary fundraisings in the six month period – a higher figure than for the whole of 2016 (£224m) – and included the three largest individual company fundraises since 2015 (GBG, Learning Technologies Group and Telit).
By way of a sector-analysis, the dramatic growth shown in the past six months has been driven by:
By comparison, the FTSE AIM All-share index increased by 14% and the FTSE All-share index by just 3%.
Although the majority (over 90%) of the businesses analysed are based here in the UK, the Ethernity Networks IPO was in fact the first overseas tech IPO on AIM since 2015. This, coupled with the high secondary fundraising levels, illustrates the fact that international investors view UK tech on AIM as value for money due to not only a favourable forex environment, but also the recent strong track-record.
Dougie Hunter continued: “The research shows not only the resilience of tech companies on the AIM market – outperforming the major UK share indices – but also that investors are expecting tech companies on AIM, the majority UK-based, to grow as a result of earning opportunities from the weaker pound rather than just benefiting from reporting international earnings.
“From our perspective, we are seeing an increasing pipeline as tech companies with IPO plans are waiting to see exactly what happens with the terms of Brexit. Our view is that as the landscape becomes clearer, there will be an increase in the number of tech companies that IPO in early 2018.
“Right now, tech businesses looking to IPO on AIM need to use this time to continue to develop their equity stories and prepare robust business plans that can withstand the turbulence that is inevitable as the UK looks to exit the EU, to take advantage of the continued buoyant market and faith from investors in their market.”