There have been 767 takeovers in the London AIM Market over the past 20 years, representing almost 36% of all delistings (2,129) over this period, according to research from accountancy firm UHY Hacker Young.
This makes takeovers the single biggest cause of shrinkage in the AIM market, since the junior market was first established in 2007, according to the results.
Momentum has not slowed down so far this year, with 31 AIM company takeovers occurring in the last year, according to the firm’s research.
The second biggest reason for the reduction in the AIM market over the past 20 years was financial stress and insolvency (20% of all delistings during this period). That said, the report noted this had fallen from about 25% of delistings between 2011-2016, to about 18% in 2021-2026.
Another major reason was the failure of a company’s strategy, whether that was failure to deliver growth or find an acquisition.
Colin Wright, chair of UHY Hacker Young, said: “The number of companies on AIM has continued to reduce over the last two decades primarily because PE funds and corporates see AIM-listed companies as undervalued.
“Those acquirers see the strong prospects of AIM companies and have been willing to pay more than institutional investors for those growth companies.”
While Wright noted that this is a compliment to the quality of AIM companies, the gradual erosion of the market has made AIM look far less dynamic.
“Perhaps it is time to consider whether it is too easy to take over a UK listed company compared to other exchanges such as the NYSE or Nasdaq.
“Should boards in the UK be given more encouragement to resist bids that they feel undervalue the company over the long term – can that be achieved without there being too negative an impact on shareholder rights?”
The main reason these are so problematic, Wright argued, was because of the lack of replacements. “Delistings are only really a problem when they aren’t being balanced off by new listings on AIM.”
While the London Stock Exchange’s efforts to make listing on AIM more appealing, such as by reducing costs, have been welcomed, Wright argued there was still much further to go in reducing red tape.
See also: AIM companies graduating to the main market hits decade high
