The 52 U.S. companies listed on AIM only account for 5% of the market, however, during the second decade of AIM's existence (2005 - 2014), 8% of all IPOs were for U.S. companies. The medium-term expectation is that U.S. companies will account for approximately 10% of all companies listed on AIM by the end of this decade in 2019; growing from 52 to 110. It is clear from the trend over the last decade that investors desire exposure to USD assets and revenue streams from high-quality, growth-oriented SMEs.
Since the London Stock Exchange launched AIM in 1995, an aggregate of £90 billion ($140 billion) has been raised for growth-oriented SMEs, £40 billion ($62 billion) for IPOs and £50 billion ($78 billion) for Secondary Offerings.
This post also provides insight into the industries and geographies in which the 52 U.S. companies listed on AIM operate.
Highlights
- U.S. companies account for 7% (16 of 234) of AIM IPOs since 2011
- U.K. captures 48% of AIM IPOs, China 9% and Africa 7% since 2011
- Internationalization of AIM is expected to continue, with focus shifting to U.S.
- Two of the three U.S. company AIM IPOs during 2014 are featured in this newsletter
- ClearStar - Georgia - Technology - Software
- Raised $15.1m with an opening market cap of $35.5m
- Pre-Money Revenue and EBITDA multiples of 2.6 and 20.4
- Pre-Money P/E ratio of 29.1
- Constellation Healthcare Technologies - Texas - Healthcare - Services
- Raised $15.1m with an opening market cap of $117.9m
- Pre-Money Revenue and EBITDA multiples of 2.0 and 14.7
- U.S. accounts for 8.0% of IPOs during AIM’s second decade of existence (2005 - 2014)
- Investors desire exposure to USD assets/revenue
- Seeking high-quality, growth-oriented SMEs
- Currently 4.7% (52 of 1,104) of the companies listed on AIM are from the U.S.
- End-of-decade expectation in 2019 is that 10% of AIM will consist of U.S. companies
- Prospective issuers should carefully consider:
- Suitability before embarking on the process
- Key advisers, most notably Nominated Advisers and Nominated Brokers
- Of which, there are 40 and 80, respectively
- £518 million raised from secondary offerings on AIM for 48 U.S. companies since 2011
- 92% of the U.S. companies on AIM have completed at least one secondary since 2011
- 61% of secondary offerings raise between £1 and £10 million ($2 and $16 million)
- Industry and geographic dispersion of the 52 U.S. companies listed on AIM - pages 6 - 7
Since the London Stock Exchange launched AIM in 1995, an
aggregate of £90 billion ($140 billion) has been raised for growth-oriented
SMEs, £40 billion ($62 billion) for IPOs and £50 billion ($78 billion) for
Secondary Offerings.
U.S. Company IPOs -
Macro View
The table below shows that all indicators were up for the
second year in a row and, in fact, more capital was raised on AIM for IPOs
during 2014 than in 2011, 2012 and 2013 combined.
Entire Market
|
Number of IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
2011
|
45
|
560
|
12
|
2012
|
45
|
695
|
15
|
2013
|
62
|
1,025
|
17
|
2014
|
82
|
2,818
|
34
|
Total
|
234
|
5,098
|
22
|
From a sectoral perspective, consumer services’ businesses
accounted for 26% of AIM IPOs during 2014, although, it is interesting to note
the significant technology component; more than half had as their main strategy
the engagement of consumers online and/or via mobile. Financial companies accounted for 15%,
healthcare AIM IPOs and industrials each accounted for 12%, technology for 10%, consumer
goods for 8% and there were even four telecommunications IPOs on AIM during
2014, accounting for 5% of the total.
The oil and gas and basic materials sectors remained in the doldrums,
accounting for an aggregate of 11% of AIM IPOs during 2014 whereas they
accounted for 21%, 33% and 51% of AIM IPOs in 2013, 2012 and 2011,
respectively.
The 52 U.S. companies that are currently listed on AIM
account for 4.7% of the 1,104 companies listed on the market, however, during
the second decade of AIM’s existence (2005 - 2014), 8.0% of all IPOs on AIM
were for U.S. companies (84 of 1,048). The
medium-term expectation is that U.S. companies will account for approximately
10% of all companies listed on AIM by the end of this decade in 2019; growing
from 52 to 110. It is clear from this
trend that investors desire exposure to USD assets and revenue streams from
high-quality, growth-oriented SMEs.
United States
|
Number of IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2011
|
7
|
45
|
6
|
2012
|
2
|
55
|
28
|
2013
|
4
|
37
|
9
|
2014
|
3
|
19
|
6
|
Total
|
16
|
156
|
10
|
Sustainable economic growth has gathered pace in the UK and
the U.S. in particular. While 59% of the
1,104 companies currently listed on AIM are based in the UK, only 48% of the
IPOs since 2011 were for UK companies.
There has been a relative surge of IPOs from China, Africa and the U.S.,
accounting for 9%, 7% and 7%, respectively, since 2011. The internationalization of AIM is expected
to continue, however, the focus should shift towards the U.S. since China
lifted its moratorium on domestic IPOs in January 2014 that had been in place
since October 2012 and the vast majority of African IPOs were natural resource
focused, which is currently out-of-favor.
U.S. Company IPOs -
2014’s Featured Transactions
The table and summaries below provide some high-level
insights into two of the U.S. company IPOs on AIM during 2014. Further details can be found by clicking on
the company name, which leads to a comprehensive four or five page summary of
each transaction.
The diversity of the sectors in which AIM-listed companies operate
is worth noting and reinforces the message to private companies seeking
additional growth capital for the next stage of their development that AIM is
open to companies from all sectors. The
three most important factors, in the eyes of prospective UK investors, are the
quality of the company’s management team, the extent of international
operations and/or the formulation of credible international expansion plans and
the realistic prospects for growth of revenues, profits and cash flows.
(in USD millions)
|
||
Industry Sector
|
Technology -
Software
|
Healthcare -
Services
|
Gross Capital Raised
|
$15.1
|
$15.1
|
Opening Market Cap
|
35.5
|
117.9
|
Revenue
|
8.0
|
52.0
|
EBITDA
|
1.0
|
7.0
|
Net Income / (Loss)
|
0.7
|
(0.8)
|
Pre-Money Valuation
Metrics
|
||
Revenue Multiple
|
2.6
|
2.0
|
EBITDA Multiple
|
20.4
|
14.7
|
P/E Ratio
|
29.1
|
N/A
|
ClearStar is a
technology and service provider to the background check industry. The Company’s Aurora platform supports all of
its screening management solutions and workflow processes, having delivered
employment intelligence to over 20,000 employers; including, Toyota, Six Flags,
IBM, the University of Pennsylvania, ADP and FedEx. The Aurora platform consists of a collection
of applications which utilize data from over 3,000 sources, ranging from
resumes to records with local authorities.
The Company was founded in 1995 by white labeling its
technology for use by Credit Reporting Agencies (CRA) and Channel Partners (CP)
to provide background checks for employers.
The original business still accounts for 71% of the Company’s
revenue. In 2008, ClearStar launched its
Medical Information Services (MIS) offering, an automated, web-based drug and
alcohol testing and results review service, sold directly to employers. MIS has grown to account for 26% of the
Company’s revenue in 2013 from only 8% in 2011.
In 2013, ClearStar launched a retail offering so as to directly engage
with employers for the provision of background screening services. The MIS and retail offerings provide
cross-selling opportunities.
ClearStar has 39 employees; 32 in Georgia, six in Florida
and one in the UK. The employees are
mainly engaged in software development, sales and marketing and general
management.
The Company plans to substantially expand its retail sales
force and enhance its branding within the geographies and industries in which
it currently operates. With the recent
opening of an office in London, ClearStar is also planning to grow
internationally. Finally, strategic
acquisitions will be a focus where the target background screening companies
have revenues of approximately $1.5m - $3.0m, profit margins of at least 10%,
an opportunity for sales and/or margin uplift, a pipeline of work directly from
employers and homegrown technology.
Constellation
Healthcare Technologies is a healthcare services organization providing
outsourced revenue cycle management (RCM), practice management (PM) and group
purchasing services to hospital-based physicians and physician groups across 18
U.S. states. The Company was formed in
June 2013 through a series of acquisitions.
The
core strategy has been to move back office functions to India. The differential between the annual cost of
employment in the U.S. ($50,000) and India ($15,000) allowed the Company to
significantly decrease operating expenses during 2013, resulting in a 169% increase
in EBITDA.
RCM
services accounted for 63% of the Company’s revenue in 2013 at a relatively
high margin. These services are provided
to hospital-based physicians and physicians who are part of a larger group
practice; including, pathologists, anesthesiologists and radiologists. Physicians utilizing the Company’s RCM
services avoid the infrastructure investment and costs associated with
maintaining their own back office operations, thereby reducing administrative
costs and increasing the amount and velocity of cash flow.
The
Company has developed a proprietary business intelligence platform, Pegasus,
which provides the Company and its RCM clients with transparency relating to
payment and operational performance. It
consists of web-based dashboards, interactive reports and data visualization
tools for effective financial and operational decision making. Pegasus provides the Company with a
significant point-of-differentiation versus its highly fragmented competition.
The
Company retains all 387 front office jobs in the U.S.; including, management,
customer service and client relationship management. Since the Company was formed in June 2013,
340 back office jobs have been moved to two third-party Indian BPO providers.
The
market opportunity for physician billing is estimated at $37 billion. There has been an increasing trend towards
physicians outsourcing their RCM operations, although, 55% still retain this
function in-house. In addition, external
pressure to reduce healthcare costs have led to an increase in billing
regulations, which have increased physicians’ operating costs, and demographic
and regulatory factors are expanding the U.S. healthcare system. The legacy installed base, increasing
operating costs for physicians and a growing market are creating the perfect
storm of opportunity for large-scale RCM service providers such as
Constellation.
The Company plans to act as a consolidator of the U.S.
third-party medical billing market, which consists of over 2,000 companies,
many of whom have revenues below $20m and low profitability. Targets will typically have at least 75
employees, the majority of whom are based in the U.S., $5m - $15m of revenue,
EBITDA margins of 5% - 25%, positive cash flow and an organizational structure
based on skill sets with well-documented jobs and procedures.
U.S. Company Secondary
Offerings
The 52 U.S. companies listed on AIM account for 4.7% of the
1,104 companies listed on the market, however, they only accounted for 4.3% of the
secondary offering funds raised since 2011.
In prior years, the U.S. companies have accessed larger amounts of capital,
resulting in rapid growth, and are now more advanced in terms of their stage-of-development
relative to AIM as a whole. As such, many
are now self-sustaining and simply require less growth capital.
Entire Market
|
Number of
Secondaries*
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2011
|
524
|
3,616
|
6.90
|
2012
|
532
|
2,478
|
4.66
|
2013
|
593
|
2,716
|
4.58
|
2014
|
607
|
3,269
|
5.39
|
Total
|
2,256
|
12,079
|
5.35
|
* This is the number of discrete secondary
offering transactions. Some companies
completed more than one secondary offering per year.
United States
|
Number of
Secondaries*
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2011
|
17
|
97
|
5.71
|
2012
|
20
|
111
|
5.55
|
2013
|
23
|
174
|
7.57
|
2014
|
17
|
136
|
8.00
|
Total
|
77
|
518
|
6.73
|
* This is the number of companies that
completed secondary offerings as opposed to the number of discrete secondary
offering transactions.
Of the 77 U.S. companies that completed secondary offerings
since 2011, 29 completed secondary offerings in more than one year, therefore,
92% of the U.S. companies (48 of 52) have completed at least one secondary offering on AIM since 2011. The distribution of
gross funds raised by these 77 U.S. companies is illustrated in the chart below,
with 61% (47 of 77) raising between £1 and £10 million ($2 and $16 million).
U.S. Company Industry and Geographic Dispersion
AIM-listed companies are organized into 90 sub sectors, which feed into 40 sectors, which feed into 10 super sectors. The 52 U.S. companies currently listed on AIM are quite diverse and operate in eight of the 10 super sectors.
The first pie chart on the previous page illustrates the
relative number of U.S. companies listed on AIM in each super sector as of the
end of 2014. Since the classifications
can be deceptive, the following paragraphs provide some detailed descriptions
and insights into the individual companies.
The second pie chart on the previous page shows the main place of
operation within the U.S. for these companies, although, it should be noted
that most have some, and in some cases substantial, overseas operations and/or
assets.
There is a concentration of oil and gas exploration and
production companies in Texas. Within
this sector, there are also three oil and gas field technology services’
companies and one cleantech company that designs and manufactures thin-film,
flexible solar panels; providing custom solar power solutions across a wide
variety of applications.
The healthcare sector consists of a range of biotechnology,
medical device and medical technology companies, located mainly in the
Northeast and along the West Coast. One of
the biotech companies is focused on improving the productivity of aquaculture (i.e.
fish farming) in a safe and environmentally sustainable manner.
Industrials is comprised of a very wide range of industrial
technology companies; from body armor for the military and other customers to
the marking, tracking and authentication of high-value goods to B2B electronic
payments and B2C voice-based contact center services and other business process
outsourcing (BPO) solutions. These
companies are mainly located in the Northeast and in Texas.
The basic materials sector consists of three mining concerns
located in the Mountain States and one located in the Northeast. The other companies are scattered across the
U.S.; one has developed and provides biological products to the agricultural
industry to improve the health, vigor and yield of major crops such as corn,
soybeans, cotton and rice, one is a forestry investment fund, one is a clean
water antimicrobial technology company and one has developed and
licenses/markets natural pesticide technologies for human and animal health
(i.e. for head lice and to repel insects and pests in livestock settings).
Financials is comprised of companies mainly located in the
Northeast that invest in the debt and/or equity of companies operating in
technology, healthcare and natural resources spaces.
The technology sector mainly consists of California-based software,
internet and digital media companies.
Consumer services is comprised of a Northeast-based media
company with some unique technology, a California-based athlete representation
agency and a Colorado-based provider of B2C online customer acquisition
solutions.
The consumer goods company is a California-based developer of
fuel cells for vehicles.
