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Junior stock markets enter era of the reverse

Reverse takeovers may become the norm on the junior stock markets as the lack of liquidity helps acquiring businesses but prevents IPOs, it has been claimed. Currently the PLUS and AIM markets are blighted by an all-time low in investor confidence as well as a serious lack of activity. However accountancy firm Mazars says that while reverse take-overs may offer little added value in buoyant markets, the opposite is often true when they are liquidity hungry. “It is likely that more reverse take-overs will arise over the next year, both on AIM and on PLUS where the costs involved in establishing a shell company are generally less,” said Robin Stevens, a corporate finance partner at the company. “In more difficult times where IPO investors are thin on the ground, a reverse take-over can facilitate the admission of a new business to the market with a degree of certainty that would otherwise be missing.” The company has been involved in five reverse takeovers this year, including the buy-up of Honour Field International by Sorbic International (now Ninety plc), and expects that there will be more to come in the next 12 months. “Companies requiring public equity will probably have to wait for some time until investment confidence returns and markets recover,” Stevens said. “However, the reverse takeover transaction involving Sorbic International illustrates that even in uncertain and falling markets well run companies with a strong business model can achieve admission to AIM and acquisitions can be undertaken.” © Crimson Business Ltd. 2008

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