What to look for in a nominated adviser

The nomad usually takes the key advisory and coordinating role during a company’s flotation. Azhic Basirov explains how to choose the right one

When AIM was created, the London Stock Exchange (LSE) set up a new structure that devolved interpretation of the rules by which the market operated (the AIM Rules for Companies) and the monitoring of compliance to a community of suitably qualified financial advisers known as the nominated advisers (nomads). They come from a variety of backgrounds including investment banks, broking houses, corporate finance boutiques and accountancy firms.

In order to become a nomad, firms provide evidence to the LSE demonstrating the requisite level of relevant public company transaction experience. Following the introduction in February 2007 of the AIM Rules for Nominated Advisers, each nomad must complete an annual return confirming that it continues to meet the LSE’s eligibility criteria. 

The nomad’s role

More than merely interpreting and policing the AIM Rules for Companies on behalf of the LSE, the nomad typically takes the central advisory and coordinating role during a company’s AIM flotation – known as the AIM admission process.  As such, the nomad usually coordinates the whole advisory team involved in the admission process, sets the timetable, leads the drafting of the admission document and ensures that necessary announcements are made in a timely fashion. So how do you go about choosing your nomad?

Choosing a nomad

There are around 60 firms approved by the LSE to operate as nomads. A list of approved firms can be found on the LSE’s website (www.londonstockexchange.com) by navigating to the AIM pages. The section on nominated advisers at the back of this AIMâˆGuide will give you more detail about many of them.  

In order to narrow down your search, you should aim to match attributes of your business to those of a nomad. The key attributes you should look for are: reputation; track record; industry experience; and client size and location.  

It is easy to find out which nomads are more active on AIM – the back pages of this guide provide a good guideline on this. You should also look for experience of your industry, whether the nomad is one that deals only with very large businesses, start-ups or something in between, and in which geographical regions the nomad has been active.  

Once you have begun to create a shortlist, you can concentrate on the nomad’s ability to help raise funds and provide ancillary services, and finally meet them to discuss costs and, crucially, determine whether the chemistry exists between you to bring about a successful listing. 

Experience of AIM and your industry

Critical to your chances of a successful AIM admission is ensuring that the nomad you choose has a track record of successful AIM work and understands your sector. A good nomad should be happy to provide evidence of both, as well as references, if you’d like them.

Your size and that of the nomad

If you are a relatively small business, is a nomad that looks after only very large companies willing to commit sufficient resource to your business? In other words, are you big enough to matter to them?  

If you are a start-up, you will need to find a nomad that specialises in that type of business, and not all do. If you are an established business, you want to ensure that the team assigned to your project is dedicated to the process and of sufficient size to handle any questions you may have or problems that may arise in an efficient manner.

Your sector

Most nomads are generalists but some specialise in particular industry sectors. Information about the sectors on which nomads focus is available at the back of this guide as well as on the LSE website. It is not essential that your nomad is a specialist in your sector but it can help if it has a thorough understanding of your field in advance.

Your location

If you are a UK-based business, why choose a nomad with predominantly overseas experience?  Similarly, if you operate abroad, it is worth checking that the nomad has some experience of working internationally and an appropriate understanding of your region.

The nomad team

We believe that the team from your nomad should comprise senior executives able to deal with your problems and to run the process smoothly. To achieve that, at Smith & Williamson we ensure that the process is director-led, not led principally by junior members of staff.  

Furthermore, you should be able to rely on the team from your nomad to hold your hand throughout life on AIM as well as during the admission process. Try to get to the bottom of who will do the day-to-day work, meet them and think about whether you are likely to be comfortable working with them for long hours into the night. That’s what you’ll be doing when you come to AIM.

Fees

All nomads should be able to give you a clear indication of how they propose to charge for their services. For most AIM admissions, it is likely that there will be a degree of risk associated with the process, and it is possible that factors outside anyone’s control may prevent you from successfully coming to AIM.  

For this reason, most nomads should be able to agree an abort fee arrangement, whereby, should events conspire to prevent the admission taking place, a reduced fee will apply. In any case, the nomad should explain its basis of fee charging in full.  

You should bear in mind that fees for certain types of business or for overseas locations may be higher than those for others. It is unlikely that a nomad will be able to provide an estimated fee without having had sight of your accounts, met the management team, formed a preliminary understanding of the key business issues relating to your company and had the opportunity of making an informed decision about whether or not they are able to work with you.

Well connected

As the central member of your advisory team, your nomad will help in the selection of the other professional advisers and service providers who, together, will take you to AIM. These will include lawyers, accountants, PR firms, registrars, printers and, frequently, independent research analysts.  

You should be sure that the firm you choose to appoint knows the AIM advisory community intimately and can help you to decide which firms might work best with your own management team. The process can be time-consuming and tiresome so you want to be sure that the team you finally select is one with which you feel comfortable working.

Other services

Many nomads are multidisciplinary financial advisory practices that can offer many more skills than mere advice on the AIM admission process.  

You may well benefit from advice on bonus schemes, share options, pensions and more. On the other hand, you may be perfectly happy with a pure nomad service.

Combined nomad and broker or independent nomad service?

Many nomads combine their service with broking; that is, they will help find the investors for you. Others act as ‘independent’ nomads, where instead they help you to identify a broker to raise money.  

There are arguments both for and against either service type but, unless you are determined to ensure that your nomad is independent of your broker or, conversely, firmly set on choosing an integrated house, your principal consideration should be to make sure that the team you choose is one that you can work with and one that has a demonstrably successful track record.

Some questions you should ask

1.  How long have you been a nomad?

2.  How many executives are there in your nomad team?

3.  How many companies do you currently represent?

4.  What can you tell me about my industry sector?

5.  What international experience do you have?

6.  How much do you charge?

7.  Can we take references from your clients?

Dr Azhic Basirov

Head of Capital Markets

Smith & Williamson Corporate Finance

25 Moorgate, London EC2R 6AY

azhic.basirov@smith.williamson.co.uk

+44 (0)20 7131 4294

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