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Top 5 tips when considering an AIM float

Destiny Pharma plc's Simon Sacerdoti discusses some practical points Financial Directors (FDs) should consider at the outset when planning to list a company, drawing on his past experiences as reporting accountant and Nominated Adviser (NOMAD). Simon has been CFO at Destiny Pharma plc since 2016. Irwin Mitchell recently advised Destiny Pharma plc on its IPO on AIM – a transaction which won Deal of the Year at the South East Insider Dealmakers Awards 2018.

1. Should you float?

Planning early is essential. Before any course of action is taken, you should be discussing with your advisers the answers to the following questions:

  • At what stage is your business?
  • Why are you floating, is it right for your business and are there any alternatives available?
  • Where do you want to go and how are you going to get there?
  • How much are you looking to raise?

These discussions are likely to occur 12-18 months before starting any legal or financial due diligence. Other options are available, which may be suitable to some businesses and not others, for example private equity or alternative forms of funding. The pros and cons of each should be considered.

2. Ensuring your house in order

Shares being traded on a public market will bring tighter regulations and higher expectations. Your business will need to ensure employee terms & conditions, policies and procedures are up to date. Certain policies may have to be implemented if they are not already, particularly in light of GDPR or the new offences on tax evasion. You may also have to convert three years of accounts to International Financial Reporting Standards– often a non-trivial exercise.

Copies of material contracts and agreements will be required and a data room will be an invaluable tool. Early organisation will make the due diligence and verification processes much smoother.

3. Business as usual

During the whole process, your business will need to operate as usual. I highly recommend that you appoint someone –whether internal or external – specifically to lead the process to avoid drawing too much on resources elsewhere, and running the risk of diverting key management focus away from the business. Having someone with AIM experience will be invaluable, but they will need to work closely with your directors and other colleagues who are assisting. Therefore, you will need to plan for additional time commitments.

4. Corporate restructuring pre-admission

A group restructuring pre-admission is almost inevitable to get your business into the corporate and capital position it needs to be in for admission. Incorporating a new holding company that will be listed or the re-registration of your business as a PLC are the most obvious steps, and will have specific legal requirements. You will need to consider the relevant course of action with your legal, tax and accounting advisers to seek appropriate tax clearances well in advance to avoid delays.

Practically, you should convert into a PLC at the latest practicable stage so that a private limited company can take advantage of the written resolution procedure, which is not available to a PLC. To approve matters swiftly, you should identify a list of key shareholders who are behind the board’s decision to float and who make up as close as possible to 75% of shareholders’ votes. Obtaining powers of attorney from these shareholders is a very sensible practical step to reduce administrative hassle.

Other areas to consider could include a review of the current share option arrangements, obtaining requisite consents to terminate existing shareholders’ agreements, documenting appropriate licences used by group companies or transferring assets within the group.

5. Post-admission considerations to plan for

You may have to appoint non-executives to the board to satisfy good practice corporate governance and independence. Those individuals will also need to sit on various committees of the board (audit, nomination and/or remuneration), who will meet periodically.

Preparing for AGMs or EGMs may be new for your business and the appointment of a registrar will assist.

Maintaining insider lists, complying with share dealing policies and other disclosure obligations may mean that those involved or responsible obtain specific training. Software that automates and assists with insider notifications has been particularly helpful.

You will also need to put in place procedures to ensure that all relevant information is captured and announced to the markets in a timely manner, and may have to improve the systems of internal financial control within the business to become suitable for a publicly traded company. There is a balance to be struck between doing this early (thereby running the risk of having overcooked systems in place should the transaction fail) and waiting to do it until after the transaction.

With the additional reporting requirements and responsibilities that will occur post-admission, taking steps to simplify internal administration will assist in the long run – simple things such as aligning employees’ annual leave periods and paydays will make life much easier.

About Destiny Pharma plc

Destiny Pharma is an entrepreneurial and dynamic biotech company that is developing a series of drugs which are designed to prevent post-surgical Staphylococcus aureus infections, including MRSA. It floated on AIM in September 2017 with Sir Nigel Rudd as chairman and a market capitalisation of £75m. Destiny raised £15.3m from institutions as part of the flotation process. It is going to use these funds to support future clinical trials.

Irwin Mitchell’s Corporate team has worked alongside Destiny for over 10 years, supporting them as they have grown and recently advised it on pre-IPO funding, the preparations required before an IPO and the IPO process itself. Irwin Mitchell is proud to work with such a ground breaking company as Destiny Pharma and we are delighted the IPO was recognised as Deal of the Year at the South East Insider Dealmakers Awards.

Key contacts

Daniel Bastide – Partner

George De Silvo – Associate

Published: 23 March 2018

Spring 2018

Key Contact

Daniel Bastide