Clarification of all important questions in the Information Memorandum
If the teaser has aroused the basic interest of a potential buyer, a non-disclosure agreement (NDA) is signed. This is followed by a written summary of all the important key data of the target company as an essential and in-depth extension of the teaser: the Information Memorandum (IM).
While a teaser requires conciseness and confidentiality, the IM aims to clarify the most important questions a prospective buyer may have before pursuing a transaction.
What characterizes a good IM and what should be avoided? Use this guide to set the course for a potential buyer's indicative offer.
Often, only very brief information packages are sent to potential buyers. This requires a great deal of prior knowledge on the part of the prospective buyer regarding the business model and market. Since numerous prospective buyers usually enter into a process, especially in the small and mid-cap segment, this often leads to a large number of queries and telephone calls. A good and detailed information memorandum can therefore save the advisor a lot of time and effort and enable a tightly structured transaction process.
A good IM fulfills two basic tasks: Firstly, it informs a potential buyer about business activities, the financial situation and provides further information about the target company. Secondly, the IM acts as an advertising brochure, emphasizing the attractiveness of the target. It is important that the prospective buyer gains a comprehensive understanding of the strengths, weaknesses, opportunities and risks of the target company and the underlying market. In addition, after reviewing the documents, he should come to a realistic assessment of the purchase price and be able to assess whether it makes sense to pursue the deal, including due diligence. In the following, DealCircle summarizes the most important building blocks that you can use as a guide when drafting your information memorandum in order to increase efficiency and the likelihood of a transaction.
Our Best Practice Guide shows you step-by-step how best to structure an information memorandum:
- Executive Summary
- Company profile
- Structure
- Products and services
- Customers and sales
- Market and competition
- Financial overview
- Further information
Read the DealCircle BestPractice Information Memorandum Guide here and also receive our template.
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