Fundraising activity levels on the domestic equity capital markets remain subdued and are unlikely to return to previous levels for some time. However, some high quality deals in resilient sectors are still attracting strong interest and substantial fundraising.

Initial public offerings and secondary fundraisings remain prolific within these safe harbours and this is particularly evident in the energy sector. A recent example was the initial public offering and admission to AIM of Resaca Exploitation, Inc., which was admitted tin mid-July.

Resaca is a Houston-based oil and gas company with assets in the Permian basin area of West Texas and Southeast New Mexico. It is a mid-sized business with producing assets and growing cash flow, with a track record of acquiring under exploited assets and developing them through a range of secondary and tertiary recovery techniques.

These methods not only enable the company to dramatically increase production rates, but also benefit the environment by reducing emissions into the atmosphere.

Resaca raised $105 million in an institutional placing, valuing the company at $240 million. The transaction was significant for a number of reasons. Resaca completed this transaction successfully, notwithstanding extremely challenging market conditions. However, the completion of the deal, which was strongly supported by institutional investors, demonstrates that there remains a strong appetite for investment in a business, which can demonstrate significant growth potential under the guidance of a management team with the credentials to implement a robust business plan.

The transaction was also significant to other US businesses, particularly in the oil and gas sector. The capital markets in the United States have become increasingly inhospitable in recent years to small and mid sized companies, particular businesses with a market capitalisation or valuation below $500 million. This, coupled with the increasingly onerous regulation in the US, has led to a growing number of US companies seeking to implement their growth strategies through a listing outside the United States, with London's AIM market being particularly attractive.

Over the last three years, more than 100 North American companies have listed on AIM, raising $4.8 billion in primary and secondary fundraisings. Resaca is unusual in that, although it has a longer term international strategy, all of its assets are currently in the United States. Historically, most US businesses coming to London have had international operations or assets, but this transaction has shown the increasing openness of the London market to businesses focused primarily on their home environment, at least in the resources sector.

The entire infrastructure of the AIM market is focused on small and medium-sized enterprises, with a balanced level of regulation and a vast pool of capital available. It is therefore to be expected that other companies in the US will wish to investigate the possibility of an AIM strategy, which in many cases will be a highly attractive alternative to either a US listing or recourse to expensive private equity finance. This has been shown to be an attractive strategy notwithstanding current market conditions.

Jonathan Martin is a partner in the London office of King & Spalding LLP, specialising in corporate finance and corporate transactional work.