Company background - this is typically the first section of the IM presented after the risk disclaimers.
The following are areas covered in the Information Memorandum:
Also make sure you include all the necessary FCA disclosures etc.Ĥ) IMs do not typically state the price of the company rather they present pertinent and sufficient information in order for the buyer and their advisors to value the business on offer.ĥ) Prior to obtaining the IM, a teaser document, which is a one to two page document describing the business in very high level terms, is provided to the interested parties in order to assess whether they would be interested to progress to the next stage. Five key points to consider regarding IMs are as follows:ġ) Financial promotions, such as Information Memorandums, in certain cases are regulated by the Financial Conduct Authority and carry specifically worded disclaimers in pre-designated locations within the document.Ģ) The volume of information presented in an IM is notably less than what would be presented in a business plan, and the wording is more concise.ģ) A non-disclosure agreement should be signed prior to releasing the Information Memorandum to potential investors and their advisors. Yet, IMs serve to standardise information provided to all interested parties, so that the decisions can be made on an even playing field. IMs in the UK are required by law to present "full, true, and complete disclosure of all the information which may materially affect the company's valuation". This is the wrong way to approach such a document, and it is often the case that many failed or contentious transactions end up in courts over document misrepresentation, leading to either purchase price adjustments or financial penalties imposed on companies, and reputational damage. Unfortunately, many corporate finance advisors view Information Memorandums more in the light of a marketing document and select to present only the attractive features of the business, burying the risks and sensitivities under generic language or curt statements. IMs are a necessary evil - they are required to be written in order to raise finance or sell a company, yet can expose the company to the risk of misleading or even misrepresenting as they straddle the realms of marketing documentation and factual overview that allows investors to make a fair investment decision. To those that aren't familiar with it, it is the document used to market a business to buyers or prospective investors and is written by a company's corporate finance advisor (such as Sapphire Capital Partners), with heavy input from the company. Ranking high on the riskiness scale of investor documentation is the Information Memorandum ("IM").