Begbies buoyant after float

An accountancy firm listing on AIM? Brian Hanney talks to insolvency specialist Begbies Traynor about its pioneering move onto the stock market.

After a few false starts, the flotation of Begbies Traynor on the Alternative Investment Market (AIM) finally got away, making it the first insolvency and recovery specialist to be quoted on a stock exchange in the UK.

There must have been cheers and a few sighs of relief when the shares, offered at 40p, closed on their first day of trading at 46.5p, a healthy gain of 16.25%. The exercise raised £4.9m net of expenses, and initially capitalised the company at £26m, but it was not without its problems along the way.

Begbies announced back in July it was looking for an AIM listing. It said it was looking to raise up to £12m though 'its core growth objectives can be achieved with considerably smaller sums'.

The company said it wanted to pursue a strategy of 'continued organic development' coupled with the acquisition of individual practitioners and small practices.

In a statement Begbies said the 'primary reason' for seeking a listing was the competitive advantage afforded by becoming the UK's first publicly quoted company in this specialist area.

Although the 'grand opening' on AIM was slated for the end of July, the month passed without this happening. A spokeswoman told Accountancy at the time the firm realised that was 'too short a time frame' and the flotation was rescheduled for the end of August.

Not long after, Begbies put out a statement saying: 'Although an acceptable level of demand has been secured to date, a number of key investors have asked for a longer period to allow them to reach an investment decision.' It added: 'Since the flotation of the company is not time critical, those requests have been accommodated.'

This was just as well, for it was 1 October before the 'admission to AIM' announcement was trumpeted and dealings started.

Cautious investors

Managing director Ric Traynor admits that many financial institutions were suspicious, particularly in the light of the problems faced by the consolidators such as Tenon and Numerica, the nearest equivalents to Begbies in getting a market listing.

He told Accountancy: 'They haven't in the short term been particularly successful, though they'll come through eventually.'

Some potential investors with 'cautious instincts' stayed away 'though in the end eight invested in us', says Traynor.

But why go the flotation route rather than, say becoming a limited liability partnership as similar firms have done? 'The reason is first and foremost that it gives us a much higher profile for the business. If you become an LLP it's a one-liner and that's it.'

He adds: 'Although we're the same size as a month ago, institutions see us as being bigger and more credible. We've been expanding over the past few years, but with equity funds from outside, we'll do it faster.'

Proud history

Begbies was formed in 1989 by Traynor and three employees, who still have senior roles in the company. Its expansion has been a mix of opening new offices and taking over existing businesses. Between 1993 and 2004, the group opened six offices in Preston, Sheffield, Leeds, Bristol, Birmingham and Watford. Today the Manchester-based company operates from some 23 locations.

The company in its AIM-listed incarnation promises more of the same.

Traynor is interested in new areas such as forensic accounting and 'troubled companies' work. But the focus will remain on insolvency and corporate rescue, which remains 80% of the business.

As regards a move to the main market, he says the company has 'no intention of going down that route' for the foreseeable future.

Since the rise in the company's shares on the first day of dealings, the price has stuck at around the 47p mark. Traynor explains: 'There's not a lot of liquidity at the moment. People are locked in.'

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