“AIM” HIGH: US FIRMS WITH MARKET CAPS OF $10-100 MILLION CAN BENEFIT BY RAISING CAPITAL IN LONDON--The Alternative Investment Market (AIM), the junior market of the London Stock Exchange, is attracting serious attention from US companies.

In the feature article below, Gerald Turner, a FOCUS Partner, details six solid reasons for the growing interest in AIM, and describes the steps US firms need to take in order to participate successfully.

Prior to joining FOCUS, Mr. Turner co-founded and chaired Potomac Capital Group, LLP, a Northern Virginia based M&A firm. For over ten years, he was active in the MBO/MBI arena in the UK. He also served as Vice President and Chief Financial Officer and then Executive Vice President, Tarmac America Inc., a $600 million division of UK based Tarmac PLC where he raised over $100 million for the UK parent from divestitures. Also, for twenty years, Mr. Turner enjoyed a diverse career with the American Can Company.

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With over 24 years of experience across many verticals, FOCUS currently has over 30 active transaction engagements in its four offices in Atlanta, Chicago, San Francisco and Washington, DC in the following specific business sectors:

• Asset Managment
• Business PRocess Outsourcing (multiple assignments)
• Business Services
• Call Center Software
• Construction (Infrastructure)
• Consulting
• Distribution
• Electrical Tranmission Equipment
• Food Processing
• Food Service Management
• Government Contracting (multiple assignments)
• Healthcare Business Services
• Home Automation
• Information Management
• IT Outsourcing (multiple assignments)
• IT Services (multiple assignments)
• Leisure
• Library Services
• Manufacturing
• Maritime Shipping
• Market Research
• Media
• Medical Devices (multiple assignments)
• Security
• Software (multiple assignments)
• Transaction Management Services
• Truck/Transport Capital Equipment

Our transaction process provides us with up-to-the-minute market knowledge in these sectors. Are any of them of corporate development interest to you? Give us a call or drop us a note.

Inquiries should be addressed via e-mail to info@focusbankers.com, by telephone to 202-785-1961 or by fax to 202-785-9413.

Voigt & Schweitzer Has Acquired Clark Substations

FOCUS acted as financial advisor to, and assisted with the negotiations as the representative of Clark Substations, LLC. Located in Calera, AL, Clark Substations is a substation packaging company serving Rural Electric Associations and contractors; investor-owned utilities; and industrial customers. V & S Schuler Engineering, Inc. of Canton, OH, is a subsidiary of Voigt & Schweitzer (V & S), a European-based group of over 70 companies specializing in galvanizing, coatings, and the manufacture of electrical utility structures. For complete details on this transaction, please click on this link: http://www.focusbankers.com/tombstones/deal_clark.asp.

Islington Capital Partners Has Recapitalized Library Systems and Services

FOCUS acted as financial advisor to, and assisted with the negotiations on behalf of Library Systems and Services, LLC (LSSI). LSSI has been a FOCUS client for a number of years. Our firm has watched LSSI validate the public library outsourced management concept and establish the firm as the premier company in the total library management sector. Currently, LSSI has over 15 library systems under management and is poised for substantial growth over the next few years. Islington Capital Partners (ICP) is a Boston-based private equity firm specializing in small market buyouts and recapitalizations. For complete details on this transaction, please click on this link: http://www.focusbankers.com/
tombstones/deal_LSSIfinance.asp.

"AIM" High: US Firms With Market Caps of $10-100 Million Can Benefit by Raising Capital in London

By Gerald Turner, Partner, FOCUS Enterprises, Inc.

Virtually unknown in the US until a couple of years ago, the Alternative Investment Market (AIM), the junior market of the London Stock Exchange, is starting to attract serious attention from US companies looking to raise capital.

As of year-end 2005, about 1,400 companies were listed on AIM. Of these, 220 were non-UK companies from 25 countries -- the first Chinese listing took place in spring 2005. There are 29 US companies, of which 20 were added in 2005.

Through the first quarter of 2006, the pace of listing has accelerated and, barring malign macro-economic influences, 2006 promises to add more than the 500 companies admitted to the market in 2005. In particular, 2006 is likely to be a year in which a record number of US companies trek across the pond for a listing.

Why the burgeoning interest? The conventional wisdom is that Sarbanes-Oxley is draconian enough in its demands (and associated costs) to cause companies to look for alternatives to a NASDAQ IPO when they consider a public listing. There may be some truth to this underlying motivation but, by itself, it will not merit serious consideration from the market. In fact, it’s the first question you will be asked on a prospecting trip to London: “Are you here because you want to avoid SOX compliance and, by the way, NASDAQ is a mature, buoyant market -- why not go there?”

Six Solid Reasons for the Burgeoning Interest in AIM

In fact, there are several excellent reasons for the high degree of interest in AIM today:

1. The institution itself and the companies who represent it have made serious efforts to spread the word in the US. Many recent industry conferences have featured a speaker talking about the merits of the market.

2. In a relatively constrained venture market, AIM offers an interesting alternative to a second or third round financing. This is particularly true if your market is not well served by proximity to venture capital. AIM is not geographically constrained by the “two hour rule” which governs the thinking of much of the venture world.

3. Entry is relatively straightforward which is reflected in its associated timing -- four months from beginning to end. A comparison might be the length of an average venture capital raise -- nine months.

4. Then there’s the light hand of post listing regulation and semi-annual interface with the City as opposed to the quarterly treadmill here in the US.

5. Finally, there’s the high likelihood that a small company’s voice will be heard on an ongoing basis, post-listing. You stand a better chance of not being relegated to the sidelines by much larger, better promoted companies. In fact, specialist financial PR firms are available at relatively modest cost to ensure that your voice is heard. This is probably the most compelling answer, regulation aside, to the ‘why not NASDAQ question’.

6. And, let’s not forget the buzz -- the stories that gather currency and fuel the fire. For example, did you hear about the company that listed on AIM with a 10 million pound raise at a valuation of over 45 million pounds with just a couple of patents and a good management team? (This last is true and unusual: a distant outlier from the norm where sales and profitability are evidenced.)

AIM is Predominantly an Institutional Investors Market

When AIM opened for business in 1995 it was the preserve of discretionary private client stockbrokers who afforded their clients the opportunity to roll the dice on young companies. Those investors are still there, but today AIM is predominantly an institutional investors market.

Most AIM companies have market capitalizations between $10 and $100 million. By contrast, the average size of a NASDAQ IPO last year was $290 million. Average proceeds from an AIM listing run around $10 million.

Getting Started: First Find a NOMAD

In starting to think about the suitability of AIM for your company’s capital needs, one is reminded of Winston Churchill’s often quoted phrase that the Americans and the English are two peoples separated by a common language. The first step is to contact a NOMAD -- not a Wall Street term -- or preferably several NOMADs. A NOMAD is a nominated adviser whose role it is to introduce your company to the market, advising you on the admission itself and your ongoing obligations.

Since this is an ongoing relationship, it requires some care and comparison among alternatives before making a choice. You also will need a broker who will work with you to ensure an appropriate market for the company’s shares. Again, this relationship is ongoing. More often than not, the NOMAD and the broker will be from the same firm -- separated by the traditional Chinese wall.

AIM Listings Require a UK or International Presence

In thinking about suitability for a listing, it is important to think about the attractiveness of the company to a UK investor. Ideally, you will have a ‘UK story’ to tell -- a growing UK division ready to expand organically or acquisition plans to grow in the UK, perhaps to consolidate an industry. At least, you should have an international story -- “our biomass technology has been installed in Australia, three European countries, and we have plans to build in Asia.” A regional US presence without a UK presence or international potential is unlikely to be sufficient.

Sector considerations always are relevant. In the recent past and today, the market likes alternative energy. For example, the ‘hot company’ referred to earlier that had patents, a good management team, and completed a very successful listing is an alternative energy company.. Gas and oil and IT companies are perennial favorites. The management team, of course, always is important -- just as it is in a venture round in the US. It is trite to say it, but that pedigree is always the first hoop through which you should be prepared to jump.

To make the effort worthwhile, your company should have an equity value of at least 10 million pounds. Overall, while the AIM listing process is speedy and productive, it is not a bargain basement and your total costs will be not dissimilar to an assisted venture raise in the US.

FOCUS Can Steer US Companies Through a Successful AIM Listing

As part of our Transatlantic practice, FOCUS has been monitoring the progress of the AIM market for some time. In the process, we have developed good relationships with a number of leading NOMADS and other service providers who cater to the AIM market. As a result, we have established an element of our practice in which we consult with companies at an early stage as they are investigating whether AIM is potentially a good fit.

As the listing process proceeds, we provide an interface between a company and various agents in the UK. The listing timetable is short and, as a corollary, it is intense. FOCUS helps to minimize the distractions at a critical time for your business.

To find out more about how FOCUS can help you in this undertaking, contact Gerald Turner, FOCUS Partner, in the Washington DC office at 202-470-1972 or via email at gerald.turner@focusbankers.com.

FOCUS Senior Advisor Dick Cook Quoted in CFO Magazine

In the article, “Try Before You Buy: Companies Are Using Alliances to Take the Risk Out of Acquisitions,” by Don Durfee in the May 8, 2006 issue of CFO Magazine, FOCUS Senior Advisor Dick Cook is quoted as follows

“…Indeed, an alliance makes better due diligence possible, particularly when the company owns enough to win a board seat (typically 8 to 10 percent for a private firm). ‘When you have a board seat, you understand the financials from one end to the other,’ says Dick Cook, a senior adviser with FOCUS, a boutique investment advisory firm. ‘You understand if the board is under pressure to sell or if they’re having a hard time paying their bills.’”

To read the complete article, click on this link: http://www.cfo.com/article.cfm/6874899/
c_6880743?f=magazine_coverstory.

FOCUS Expands, Adding a Senior Advisor in Washington and a Director of Business Development in Atlanta

FOCUS Enterprises, Inc., an investment banking firm providing merger, acquisition, and corporate finance services to middle market companies is adding two new executives: a Senior Advisor, Jay Pisula, who will be affiliated with the firm’s Washington DC headquarters, and Georgi Petty, Director of Business Development, who will be based in the firm’s Atlanta office.

“Adding professionals of the caliber of Jay Pisula and Georgi Petty solidly supports the continuing success and growth of our firm,” says Marshall Graham, Chairman of FOCUS Enterprises. “Attracting such remarkable and varied talent to the FOCUS team substantially adds depth and expertise as we continue our expansion.”

About Jay Pisula

Before joining FOCUS, Mr. Pisula was President and CEO of TSI TelSys Corp.; President and CEO of Network Storage Solutions Inc.; President of Network Imaging Corp. (now Treev); Chairman, President, and CEO of Digital Transmission Systems; and President and CEO of Teleos Communications, Inc. Currently, Mr. Pisula also serves as either a Board Member or an Advisor to Syntonics LLC; Gigamedia Access Corp.; Quintum Technologies Inc.; and Forefront Inc….more

About Georgi Petty

Prior to joining FOCUS, Ms. Petty was an outside sales consultant with John Hancock Financial, responsible for developing business in the Georgia market and bringing in $33 million to the company. Previously Ms. Petty was an investment banking analyst with KPMG Corporate Finance, LLC…more

RECOMMENDED READING: Mid-Sized Private Firms Don't Face Pricing Penalties

In the April 2006 issue of Mergers & Acquisitions, Martin Sikora writes about how deal pros are saying the fabled liquidity discount doesn’t exist in today’s M&A market. However, according to Sikora, discounts based on small size are another matter. Here are excerpts from the article.

“…In fact, the only sector of the marketplace where hard evidence of a discount exists is in the lower tier of the middle market, and it’s pegged to size -- targets of $10 million to $50 million in sales – as opposed to whether the target is public or private…the sellers of the entire company shouldn’t have to take a discount, because completing a deal in the private market usually runs smoothly.

…What has become more efficient and more objective…is that with the rise of the private equity groups, there has been a market for almost any mid-sized company since the 1980s…In a report to the International Network of M&A Partners (IMAP), Slee (a Managing Director at Robertson & Foley) reaffirmed a sliding scale for EBIT multiples based on annual revenues with firms booking less than $10 million selling at a median multiple of 5.4 in 2005. The multiples scaled upward to 6.4 for targets in the $10 million to $20 million range and more than 8 if the seller delivered more than $50 million in revenue.”

About FOCUS Enterprises, Inc.

Headquartered in Washington DC, with offices in Atlanta, Chicago, and San Francisco, FOCUS provides a range of investment banking services tailored to the needs of middle market companies. FOCUS specializes in serving businesses with revenue or transaction sizes between $5 million and $300 million, serving entrepreneurs, corporate owners, public companies, private companies or operating units, and various types of investors.

For 24 years, FOCUS has successfully integrated corporate development consulting and transactional expertise with its extensive research capability. The firm has long standing experience in completing mergers, acquisitions, divestitures, capital formation assignments, corporate development consulting projects, and financial advisory engagements.

Over twenty FOCUS Partners and Principals provide over two centuries of C-level operating experience in a variety of industries.

Please contact us at: info@focusbankers.com