Private eyes win on new market

PRIVATE EYES and credit information agencies are unlikely beneficiaries of AIM, the new Alternative Investment Market, set up to sponsor small and emerging companies. Their involvement stems from the due diligence needed to obtain a listing on AIM.

Credit agencies are being used to investigate directors' personal finances, to ensure they have not been involved in bankruptcies, or do not have outstanding County Court Judgments against them. For example, Dun & Bradstreet, the US credit rating agency, can supply details of a director's previous company history, including any receiverships or liquidations. It will also attest to a company's standing with its creditors, and if it pays its bills on time.

Companies used to obtain personal credit ratings on individual company directors include CCN, based in Nottingham, and Equifax Europe, a subsidiary of the $1.5bn sales US giant, Equifax Inc.

Richard McCrowham, the UK managing director, says the company carries out verification work - as it is known in financial circles - for several stockbrokers and financial institutions.

Private eyes are also being used, although nominated advisers are coy on naming them. Jeff Katz, director of operations at Kroll Associates, the US private investigations agency and one of the largest players in the UK, said he is unaware of doing this work specifically for AIM flotations.

This might be down to cost, as Kroll usually works on large deals, requiring complex due diligence.

The advent of the private eye is linked to one of the complaints companies have made about AIM. The Stock Exchange has been investigating charges that the market has failed in its original purpose of providing a low- cost route to a share quotation, and a cheaper way to raise capital than a full Stock Exchange listing.

Excessive due diligence is one of the problems cited. One source mooting an AIM flotation said: "Fees are being pitched at outrageous levels. Some companies are being asked to pay pounds 100,000, when all they want to raise is a few million."

Fee levels paid by companies that have come to AIM vary substantially depending on whether its advisers have high City profiles. DBS Management, a financial planning company based in Huddersfield, paid pounds 250,000 for the privilege of transferring from the Rule 4.2 market for smaller companies.

Kenneth Davy, the chairman, said the company had examined the options and decided it was in shareholders' best interests to go for the Rolls- Royce model. "We received lots of speculative proposals for cut price packages, but we deliberately chose not to do it on the cheap because it would be better for shareholders in the longer term."

Preston North End, the third division football club that anounced last week it was moving to AIM, took a less expensive route. Its attempt to raise pounds 4m from a share offer in September is expected to cost it less than pounds 80,000. Some firms are offering packages as low as pounds 50,000.

Greig Middleton, the combined adviser and stockbroker to the club, already has experience of the ins and outs of football clubs. It arranged Celtic Football and Athletic's share issue earlier this year, which defied expectations to raise over pounds 10m in a subscription for the 4.2 market. Celtic also intends to transfer to AIM, with the demise of the 4.2 on 29 September.

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