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Number of private equity acquisitions of AIM companies trebled in last 12 months

The number of private equity (PE) backed deals for AIM companies has trebled in the last 12 months and the Covid-19 driven stock market fall could see this trend continue if AIM’s valuation gap with the main market grows, says accountancy and business advisory firm, BDO LLP.12 companies from AIM were acquired and taken private by PE funds in 2019/20, up from just four deals in 2018/19 (year end March 31).

BDO says that if the Covid-19 crisis impacts on share prices, AIM companies could see a repeat of previous cycles, when low AIM company valuations saw PE funds tempted to acquire them at attractive valuations.
The AIM 100 has dropped 34 per cent from its peak in the last two years, compared to the FTSE 100 which has dropped 27 per cent from its peak in the same time frame.
BDO says that PE funds have become more comfortable with acquiring AIM companies in the years since the last financial crisis as the market has improved its reputation for governance and become home to more large, higher-quality and profitable companies.
The firm adds that PE funds also have significantly more firepower to make acquisitions than they did in 2008/09. Long-term inflows of investment over the last decade mean many funds still have an urgent need to deploy capital and are waiting for visibility over the end of the “lockdown” in order to resume dealmaking.
Post COVID-19, it is likely that deal activity for AIM listed companies will pick up quicker than for private companies as listed companies see their valuations fall far more quickly and visibly than those of private companies.
John Stephan, Mergers & Acquisitions Partner at BDO, says: “AIM received a lot of attention from private equity over the last 12 months. A lot more funds have become comfortable with public-to-private deals for junior market companies as AIM’s reputation for bigger, higher-quality companies has grown.”
“There is certain to be a drop off in deal activity while the economy navigates the storm of COVID-19. However, when PE funds are comfortable that the economy is on the path to stabilising, then they will potentially be on the lookout to snap up some of the well-run, profitable businesses that are listed on the junior market.”
The value of ‘take private’ deals of AIM companies in the last 12 months hit GBP1.1 billion. These deals included:
• Basalt Infrastructure Partners GBP255 million takeover of Manx Telecom Plc, the broadband and telecoms provider, in May 2019

• TA Associates Management’s GBP161 million takeover of StatPro Group Plc, the global software company, in Oct 2019

• Bowmark Capital’s GBP114 million takeover of Tax Systems Plc, a compliance technology company, in March 2019

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