Christopher Spink’s Pick of AIM

AIM’s flotation frenzy seems to have quietened down, with only a trickle of companies joining the market since the start of August. However, there continues to be a steady flow of reverse takeovers for investors to assess.

This trend should continue as the 70 or so shells with less than £3 million in cash have only until the end of next March – just six months – to do a deal. Otherwise they face losing their quote on AIM.

During August alone, seven deals involving such shells were concluded. For example, John Gunn’s Rotala acquired Midlands chauffeured car business Flights (see column on page 15) and Titan Move snapped up a caravans outfit. Elsewhere Neutrahealth, in which foods entrepreneur Sir Gulam Noon has a stake, bought a health supplements business.

Mobile telecom plays continue to attract a great deal of interest. Fast growing German mobile phone subscription service getmobile europe reversed into Pierce Casey’s Fitzwilliam Capital in a £43 million deal. And 3G video conferencing concern All New Video has been acquired by Gordian Investments for £4 million.

Ashcourt acquired

Reverse deals involving trading companies can electrify the market. For example, shares in fledgling fund manager Ashcourt shot up 73 per cent in early September after a £13 million cash offer from purpose built shell Syndicate Asset Management.

Syndicate – set up by AIM shell Equity Special Situations – wants to consolidate a series of smaller fund managers. And many of them have already given the group’s plans a strong vote of confidence.

Indeed Syndicate, led by ex-Beeson Gregory corporate financier Jonathan Freeman, has pulled in £33 million ahead of its own flotation on AIM. Freeman says the shares might open at double the 60p price at which this cash was raised, such is the demand.

After funding the Ashcourt purchase, Syndicate will have £20 million left for other acquisitions. Freeman intends to use debt as well to finance deals, giving him added firepower to shake up this sector.

His basic idea is to create economies of scale by giving fund managers access to office systems across the group, but allowing the individual businesses to operate autonomously so they have the independence to flourish. Expect another deal before long.

With such keen demand from institutions, Syndicate’s racy shares have a lot of hope-value already built into them. Private investors might want to wait until a more liquid market develops.

Football frenzy

There are, of course, a range of better-priced situations that could be exploited. For instance investment company Amberley, controlled by veteran financiers Guy Naggar and Peter Klimt of Dawnay Day, has recently taken a 24 per cent stake in smart card developer Fortress (GB) for £3.2 million.

The shares have moved up 1.5p to 12.25p since the deal, but that still values Amberley at just £5.7 million. With a contract in place to supply cards to Arsenal and other premiership football clubs (the cards are replacing traditional paper-based season tickets) that looks too cheap.

Another football-related company – player agent First Artist – has done a series of deals to revive its business and reduce its reliance on seasonal income from player transfers.

In mid-August it took over financial adviser ABG for £3 million – a transaction classified as a reverse because First Artist, which suffered a £15 million loss in 2003, was valued at less than £2 million prior to the deal.

Since then, chief executive Jon Smith has bought events management outfit The Finishing Touch for £3.4 million, bringing closer his aim of making football transfers only responsible for a third of the group’s income.

Despite this intention, Smith says the summer season was nevertheless First Artist’s best ever for transfers, so this year’s results should see the group return to profit. At 7.25p – and a market cap of £5 million – the shares could still have some way to go.