The barbarians are at the door: LSE bosses must do more to stop acquisition frenzy, says MAGGIE PAGANO

Calling all UK AIM Board Directors! Instead of putting on a Christmas sweater, put on your bulletproof vest, dust off your bid defense manual, and start sweet-talking shareholders to keep them on your side.

This is the brutal conclusion to Peel Hunt’s devastating warning, which predicts a blitz that could see a third of Alternative Investment Market companies taken over next year.

Peel Hunt’s flashing red light comes with his report, aptly named Barbarians at the Gate.

After receiving surveys from the City, Michael Nicholson, head of mergers and acquisitions advisory at Peel Hunt, predicts that almost a third of the 695 AIM-listed companies valued between £50m and £250m are vulnerable.

While the magnitude of Peel Hunt’s forecast is shocking, the reasons are not the least bit surprising or mysterious.

They have been well-rehearsed by market participants and critics for years. It’s pretty simple: companies of this size are very vulnerable due to the illiquidity of the junior market, their depressed valuations and their reduced ability to use the capital markets.

There’s another factor Nicholson points out, one that isn’t often mentioned but is becoming more pertinent.

Unless boards provide shareholders with clear information, they open themselves to public criticism and challenges from investors who do not believe their best interests have been respected. It’s a fair point.

However, the bigger picture is quite clear. A certain level of acquisitions is good for business and the economy in general: creative destruction and all that.

But the level of AIM-listed companies leaving the stock market is unhealthy because many are sold at prices that are too low or are withdrawn because costs are too high and regulations are too strict.

About 90 left this year, a 23-year low. It’s not just AIM that is suffering.

The main London Stock Exchange (LSE) has also seen an exodus of companies across the Atlantic: 88 have delisted this year and only 18 have taken their place.

It is the largest net exodus in almost two decades. And the number of new listings will be the lowest in 15 years.

Rio Tinto is the latest company to come under pressure from investors to abandon its dual listing in London and Sydney and unify its structure in Australia.

Activist investor Palliser Capital argues that the current double listing subtracts £40bn from the mining group’s valuation.

London’s stamp duty on share trading is blamed as one of the biggest factors behind the exodus.

As we’ve been reporting, top financiers want the 0.5 percent tax scrapped, claiming the government is “taxing the stock market out of existence.”

Behind the scenes, top LSE bosses David Schwimmer and Julia Hoggett agree that the share tax is perverse, particularly when the Labor Party made such a song and dance about growth.

They also say they are pulling the necessary levers to improve market conditions with regulators, while pension reforms should make investing in growing companies more attractive.

However, this will take time, and time is running out if the LSE is to be restored as one of the world’s great international capital markets and the AIM as one of the most dynamic growth exchanges.

One thing is certain. If LSE bosses don’t do more to show they are aware of the problem, you can bet new rival markets will emerge to take their place.