A higher number of takeovers and lower number of IPOs have caused London’s Alternative Investment Market (AIM) market to shrink to its smallest number of listed firms since 2001.

According to new research by accountancy group UHY Hacker Young, 27 companies listed on AIM were taken over in the year to March 2 in M&A deals worth a total of £7.8 billion.

Private equity houses continued to be a major driver of AIM M&A deals, accounting for 62% of M&A deals by value (£4.96bn) in the past year. Seven of the 27 AIM M&A deals recorded over this period were PE backed.

“There are now just 669 companies left on AIM, down from the 685 companies that were on the market a year earlier,” said UHY Hacker Young.

“This takes the number of companies left on AIM down to its lowest level since 2001.”

There were 1,044 firms listed on AIM in 2014-15.

UHY Hacker Young said the number of AIM companies being targeted for M&A deals could increase as corporate and private equity buyers seek to benefit from lower valuations of AIM firms.

“Over the past six months, the AIM 100 has significantly underperformed the main market index, falling 6% from 3,352.25 on September 18 to 3,251.44 on March 18,” said UHY Hacker Young.

“Conversely, the FTSE 100 increased by 5% in the same period from 8,253.68 to 8,702.57 over the same period.

“Tax changes in the Autumn Budget reduced the attractiveness of AIM shares to some private investors. From April 2026, UK AIM shares will be subject to 20% inheritance tax, having previously been free from IHT.”

UHY Hacker Young said higher profile AIM companies that have been taken over in the past year include:

• Smart Metering Systems: acquired in April 2024 by US PE investor KKR for £1.3bn
• Mattioli Woods: The wealth manager was acquired by private equity firm Pollen Street Capital for £432m in March 2024
• Belvoir Group: The lettings agency was acquired by Property Franchise Group in March 2024
• Music Magpie: The used electronics retailer was acquired by electrical retailer AO World in October 2024 for £10 million

UHY Hacker Young said the gap that has grown between AIM companies being taken over and new companies joining AIM through IPOs shows signs of narrowing.

One company listed on AIM in 2025 (year to March 18), with another four companies intending to list in the coming weeks. This is compared to 11 companies that listed throughout the whole of 2024.

Colin Wright, Partner and Group Chairman at UHY Hacker Young, said: “The interest in AIM companies from corporates and private equity houses is a sign the market is functioning well as a ‘shop window’ for growing companies. However, the lack of IPOs means there are concerns over the health of the market over the longer term.

“The high value of AIM M&A deals shows a lot of higher quality companies were taken off the market, particularly with the help of private equity houses. However, problems could arise if those companies aren’t replaced by new listings and some of the liquidity leaves the market.”