More U.S.-based businesses are crossing the pond in search of investment capital in the public market not burdened by U.S. regulations.

"The regulatory and political climate makes it prohibitively expensive to be a small public company in the United States," says Bryce Linsenmayer, an attorney in the Houston office of Haynes Boone.

In the United States, small publicly traded companies felt the effect of the Sarbanes-Oxley Act and subsequent rules in the first year after its 2002 implementation more than larger publicly owned companies. In that time, the inclination for small public companies to be purchased by private firms jumped 53 percent, according to a RAND Corporation report released in March 2006.

Ten years ago, Linsenmayer notes, smaller companies seeking capital would have been able to raise $10 million to $30 million and be listed on NASDAQ. Now, the Alternative Investment Market (AIM) has become a significant funding source. Linsenmayer says the average AIM offering is between $10 million and $40 million, although it can be more than $100 million.

Although AIM is an alternative to complicated and costly U.S. regulations, it does not mean AIM is quick, easy or cheap, says Linsenmayer who advises clients on AIMs. He also speaks and writes on the subject. "It's not an easy process. It's not the wild, wild west. It's incredibly sophisticated, where reputations are everything."

The investor base typically is composed of 15 to 40 institutional investors who are in it for the long run, Linsemayer says.

Although on the London Stock Exchange, AIM no longer has few foreign issuers like it did in its beginnings from 1995 to 2003. Now the market sees its future primarily among non-U.K. issuers, Linsenmayer says.

"It certainly helps to have an international aspect to the business plan and a smart company that wants to globalize," he says. But most important is a good story that interests investors. While 2005 saw popularity in natural resource-related companies, this year is seeing growth in technology, life science, communications and entertainment/gaming, Linsenmayer explains.

"However, AIM now covers all business sectors, and companies across the full range are flocking to the market," he says.

Here is a brief overview offered by Linsenmayer.

Issuers are sponsored by a nominated advisor, known as a "Nomad," who is responsible for maintaining the profile and vouching for the company. This person conducts extensive diligence before an AIM offering because it is his or her reputation on the line. The Nomad confirms the company is suitable to list on AIM and advises on the content of the offering materials.

An AIM admission does not fall under any regulatory body like the Securities and Exchange Commission in the United States.

An AIM-listed company reports financial information every six months, not quarterly as in the United States, a significant cost and time savings.

The basics of AIM

Linsenmayer offers these tips and guidelines for AIM:

The process of being listed on AIM should be somewhat familiar to U.S. issuers. It includes the creation of an offering document that contains the issuer's background and financial information. AIM requires the nominated advisor, referred to as a Nomad, to vouch for the to-be listed company's good name and subsequently maintains the security's profile.

The investors know who are the reliable Nomads and brokers. "Their reputation is everything," Linsemayer explains. As such investors may be more forgiving of an off quarter, but they also are operating in a low trading volume market so liquidity might not happen as quickly impacted as it could in a U.S. market.

Because a Nomad's reputation is on the line, he or she typically conducts more due diligence than a potential U.S. stock market listing. Many Nomads also act as brokers, but they are not required to do so.

The cost for the public offering typically is somewhat less than in the United States. Fees for the Nomad and broker typically range from 3 to 5 percent. Fees for accounting, which could follow U.S. or U.K. GAAP, are similar to the United States. Legal fees are slightly higher, commonly ranging from $50,000 to $100,000 for Nomad's counsel and $200,000 to $400,000 for company counsel.

Linsenmayer also says U.S.-based AIM company executives should travel several times a year to meet with London's financial community or even elect an independent director from the United Kingdom to enhance the company's presence on AIM.

Many Nomads advise U.S. issuers to form a UK Plc as a holding company above its U.S. subsidiaries or assets, but most U.S. issuers choose to remain domiciled in Delaware or their states of incorporation, Linsenmayer says. e e