When contractor Connaught sought expansion, independence and staff motivation, a flotation was the perfect solution.
On the eve of Connaught's share market debut last November, group managing director Mark Tincknell looked shattered. The daily commute from the firm's Devon base combined with up to eight meetings a day with prospective investors had taken their toll.

The company's timing could hardly have been worse. Small capitalisation companies were out of favour with the market, construction firms even more so, and world markets were crashing as Asian fever swept the globe. But four months on, a much more relaxed Tincknell is happy to admit, albeit slightly hesitantly, that it had all been worth it. The company's shares are trading at 149.5p – 24.5p up on their opening price – and with money in the bank, he is looking to expand.

Connaught's father set up the company as a specialist contracting firm in 1982 and sold out to his son in 1996. Tincknell has since diversified into building services and facilities management. Having reached £39m turnover in 1997, with a pre-tax profit of £1.36m, he decided the company needed something more. His aim was to raise the funds needed to expand, pay back the venture capitalists who had backed his buyout, and give staff a stake in the company. The float, he says, did all three.

"From our perspective, it's given us a good platform to go forward, it's incentivised the staff and we are aiming to make it to the main market within three years." It took exactly a year for the flotation to set sail, three months of which was a full-time job for everyone on the executive team. As Tincknell says, the figures prove it was worth the sleepless nights; the float raised £3.2m, and shares were oversubscribed by 20% . Fees for advisers, prospectus printing, statutory fees and other such necessities cost Connaught £250 000.

Opposite, Tincknell documents briefly the 12 work-saturated months of stress that made up Connaught's path to market.


Mark Tincknell leads a management buyout of his father's business with £750 000 backing from Midland Growth Capital.

June 1997

The business is doing well but is a long way from fulfilling its potential. Turnover has increased from £12m to £39m in five years, but Tincknell is keen to expand further into the facilities management market, away from the cyclical construction market.

The idea of a float is first mooted: "We could have rumbled along quite happily, but we realised we would have come under pressure eventually. At some point the venture capitalists would want some sort of return. We wanted to take the matter into our own hands rather than have it forced on us," Tincknell explains.

We could have rumbled along quite happily but we realised we would have come under pressure eventually. We wanted to take it into our own hands

Mark Tincknell, managing director of Connaught

January 1998

After seven hours of discussions between the board and venture capitalists in a Bristol hotel room, the decision is taken to head for the share market. The idea of reversing Connaught into an ailing listed construction business is suggested, but Tincknell rejects it. "We didn't want the baggage of a new-build construction company at the mercy of the construction cycles," he says.

A listing in the Alternative Investment Market's support services sector is opted for as being the best way in. "We saw AIM as a stepping stone to the main market. We didn't consider ourselves to be big enough for the main market, but we were at the larger end of AIM. We would rather be a large fish in a small pond to start out with."

February/March 1998

The beauty parade begins in earnest, with Connaught needing a group finance director, a broker, an accountancy firm, and a lawyer. "I wasn't parochial about it," says Tincknell, "but everyone is from Bristol or the West Country. It cost us about 40% less than in London. It was important that everyone was only about an hour away. I think having a local broker is good for a smaller firm because they are more focused on supporting your share price." Two London brokers are rejected in favour of Bristol-based Rowan Dartington. Bristol lawyer Burgess Salmon also gets the nod, and KPMG is appointed accountant. Jim McLoughlin, an experienced financial director with two floats under his belt, joins the firm.

May 1998

McLoughlin begins to draft the prospectus – the company's "shop window" telling potential investors what it does, how it does it and what a good buy it will be. It will go through seven drafts.

July 1998

World financial turmoil kills London investors' appetites. Connaught meets with the broker and decides to press ahead. Accounting due diligence begins. Connaught's accounts department work all weekend to produce an analysis of the firm's financial record. KPMG takes three weeks to audit the data.

One trilby-wearing character said he had no interest in buying shares … he’d only honoured the invitation because the merchant bank where we were was the last in the City to serve cigars with coffee

July-September 1998

Legal due diligence is next. To be accepted by the broker, a law firm must go through a firm with a fine toothcomb. Connaught passes.

October 1998

The prospectus must be entirely accurate – if an investor loses money it can sue if it proves it was misled by the document. Eight lawyers, two accountants and Tincknell meet to approve the prospectus and debate whether they can describe the company as "resilient" for half an hour.

November 1998

Marketing begins in earnest. Tincknell, finance director McLoughlin and the broker troop around making presentations to potential investors. For 10 days, they make up to eight presentations a day to bored, enthusiastic or indifferent bankers. Tincknell remembers one trilby-wearing character from a lunchtime meeting. "At the end he said we had a very nice company, a very nice presentation but he had no interest in buying shares due to the wider economic climate. He'd only honoured the invitation because the merchant bank where we were was the last in the City to serve cigars with coffee."

23 November 1998

The final sign-off of all the documents ahead of float day.

30 November 1998

Mark Tincknell’s tips for floating a firm

1 Make sure your family knows what is involved – they are not going to see you for a few months 2 Take a good holiday before the fun starts 3 Be aware that life in a listed company is very different from running a private business. If you haven’t done it before, make sure you talk to someone who has 4 Have an experienced financial director on board – preferably one who has helped float a company before – or who has worked for a listed company 5 Likewise, make sure you have good non-executive directors with diverse skills. Connaught managed to secure the services of former Wimpey main board director Tim Ross and Bob Henry, a merchant banker 6 Try to find a broker that really understands small businesses and is excited about what you do 7 There will be an awful lot of different opinions fired at you. Listen carefully to advice but, ultimately, make up your own mind 8 Manage the fees carefully. Watch out for extra charges from professionals. Remember, it is in their interests to drag out the process 9 Always remember you are doing it for the sake of the business. Some of the decisions you make may be hard to live with afterwards. Take it seriously

What is the Alternative Investment Market?

The Alternative Investment Market was set up to give companies too small for the main stock exchange the opportunity to list. Since its launch in 1997, it has raised £1.6bn. Advantages of AIM listing
  • It gives businesses access to equity. This leads to expansion opportunities that would have been beyond them before
  • It raises a firm’s profile with customers and around the world
  • It motivates staff. Workers with a stake in the company have an interest in seeing it do well
  • It reassures business partners, suppliers and potential clients that the company is thoroughly regulated with accounts, shareholdings and major transactions in the public domain
  • AIM has fewer compliance regulations than the main market.
  • It is a stepping stone to the main market
  • It is open to new companies. Firms have to have a three-year trading record to join the main market
  • Floating can be expensive. AIM advises companies that entry costs are at least £250 000 to £300 000
  • The market lacks liquidity. Critics complain that there are not enough buyers and sellers, and shares tend to remain at the same level for long periods of time
  • It puts an extra compliance/administration burden on companies
  • It can open the company up to hostile takeover bids