Many of our clients have been keen to understand what an Information Memorandum (IM) should look like, and we have some pretty strong opinions on this. Here is a (de-identified) sample of one, to show you what we think it should look like.
Some advisors will encourage clients to use only short, even 1-page flier to attract potential buyers. We do provide a quick few paragraphs of overview, though hopefully not enough for your business to be identified, early in the marketing process. But this is only enough for buyers to understand that the business suits their rough agenda and decide to have a real look at it.
With a very short IM, every buyer will need to talk to the principals to make any realistic assessment, and often this will lead to a series of investigatory meetings before finding out whether they’re legitimately interested and contemplating a price anywhere near an acceptable range.
That process takes a lot of management time, which is taken away from running the business – at exactly the time that you most need to keep your numbers looking good!
It also drastically limits the number of prospective purchasers who can have a look at the business, and makes it particularly difficult for overseas buyers to work with you. Those overseas buyers (often with US$!) often have a very different view of valuation from domestic buyers and can be well worth the effort to talk to.
ICT Strategic Consulting IMs are designed to cover the entire business in enough detail to let a prospective buyer feel that they have enough information to make an informed estimate of the valuation they might apply to the business. This allows us to week out those that are outside of your acceptable price range before they’ve taken up a lot of your time as a vendor.
It also helps us to bring a larger, more competitive field of buyers which inevitably results in better valuation outcomes for sellers, and more ‘fall-back options’ should your favoured buyers drop out.
They’re a lot of work to produce, but having put together almost of 50 of these over the years, we’ve got the process down to a fine art!