#information memorandum example

It is necessary for companies to prepare Information Memorandum to raise a certain amount of funds. It is also important to accompany the presentations and for that the document requires to describe the existing business. The investment opportunity should also appeal to a great extent to the potential finance providers. There’s a team of corporate finance specialists who deal with debt and equity financing. They have great network of relationships which provides great access to the potential investors.

The Objectives:

It is basically a written description of the business. It is what the client will be seeking the funding from here, especially from debt finance and equity investors. It is a sales document as its main objective is to raise finance.

The scope:

The length of the Information Memorandum depends on the type of investors who are targeted. The description of the business is always taken from an operational and strategic perspective which is the main core content. The market and the investment opportunity also depends a lot on the investment rationale which is the return on investment. Many formal legal requirements are also implied. The funding instruments are even offered for sale so that the public can buy them. The shares and the other forms of funding instruments are very extensive.

The Services Provided:

The services mainly focus on the investment aspects and the basic business plan of the Investment Memorandum. A document is prepared along with the business description and the explanation is given of the investment opportunity. A full excel based business planning is very helpful. It includes market potential, description of the operations, the business strategy, detailed financial modeling, competitive environment, the organization and governance as well as the risks and valuation.

The funds that are invested in the business are used for future funding requirements and for the financial structure of the business. The equity investors prepare the investment rationale to achieve the return on their investments. It is achieved by future trade sales, by dividend payments, IPO and how the debt is mainly repaid. Teasers and presentations are also prepared for varied potential investors.

Regulated services:

An information memorandum is a document aimed at prospective investors/buyers. The prime aim of an information memorandum is to encourage prospective investors to invest in your business. Apart from helping you to draw interest in your business, an information memorandum also helps establish transparency. 

An information memorandum package is usually lengthy as it must contain information about the company’s assets and liabilities, its financial position, market position, business description, strategies, clients and target market.

The Importance of Having a Well Organized Information Memorandum

An information memorandum offers a great opportunity for you to present all the relevant information about your company. It’s important to present the information in a logical, appealing and coherent manner. After all, the document is a reflection of the company’s commitment to the sale, professionalism as well as the quality of management. 

A top-quality information memorandum is crucial for ensuring a smooth transaction as it nurtures transparency and minimizes the need for constant correspondence. 

Even though the purpose of an information memorandum is to invite investment, it shouldn’t be used a pitch book. On the contrary, it is primarily used as an informational package about the company. 

This document provides a holistic view of the operations of the organization that seeks investment. It can be considered as a mission-vision document of a company as it provides information about its goals in the short-term as well as in the long-term, and the benefits the investor will receive by investing in the company.

What to Include in an Information Memorandum?

Here’s a quick checklist to help ensure you have covered all the essential information in your information memorandum. 

Executive summary – Include an overview of the company, the scope of the investment, the key financials as well as critical investment consideration. 

Company – Provide information such as business model, milestones, company history, legal structure, and corporate vision. 

Business – What is the company’s target market, where are the business units located, what are its offerings and who its biggest clients?

Operations – Provide details about suppliers, logistics, production and distribution, marketing and sales, quality management, systems and processes, and research and development. 

Resources – This section should include information about the organization, its employees as well as the infrastructure. 

Customers – In this section, provide an overview of your important customers, a summary of attrition trends as well as projections, customer concentration analysis and a detailed account of the company’s market share. 

Industry – Here, you can provide information about the industry structure, your strategic position in the industry, the company’s competitors as well as the company’s competitive position. 

Financials – Provide an overview followed by key financials such as balance sheet, profit and loss statement, cash flow statement and current trading. 

Outlook – This is an opportunity to summarise the company’s existing operations, to highlight the company’s short and long-term goals, to summarize the important growth opportunities and an overview of the main strategies being used. 

The information memorandum of a business is an important document that helps create the right impression on the prospective investors. Get it right the first time to make the most of capital raising plans.  

If you are wondering whether an information memorandum is of any use, then you have reached the right place. In this article, I will address the concerns of business owners and show the usefulness of an information memorandum.

What is an Information Memorandum?

This is a document that provides in-depth information about your business so the investors can make an informed decision. It provides a summary overview of the company that’s up for sale/investment.

The primary purpose of an information memorandum is to provide information to investors so that they can understand the business better and review the opportunity at hand. The information contained in the memorandum will help investors decide whether they want to invest in the business.

Now let’s take a look at the benefits of preparing an information memorandum.

Professional

Visualize this. You are at the investors meeting and you’ve just concluded your investment pitch. Your investors are expecting something in writing that they can glance at leisure. Now, what happens when you don’t have anything to handover to your investors?

What sort of impression will this create on your potential investors?

Surely things won’t start on the right note in this case.

Further, they may begin to doubt the very deal. They may wonder whether there’s something to hide, and might not be convinced about the investment offer.

When you have an information memorandum handy, it shows to your investors how professional, prepared and thorough you are. It shows how committed you are to this deal. The investors get a feeling that they are dealing with a committed seller.

Helps Investors in their Decision-Making Process

Your investors want to know all they can about the investment opportunity and your offer. They may have a hundred questions in their mind, and they are looking for answers.

With an information memorandum at hand, they can go through your financials, your analysis and projections to get a better understanding of the investment opportunity. 

Moreover, a professionally prepared information memorandum will help clarify all doubts your investors might have. 

When there’s no information to go through, it leads to many more questions, and every question will only increase distrust. In the end, you will have spent a lot of time, effort and money in vain

Shows Your Commitment

When you have an information memorandum, it shows to your investors that you are committed. Investors realize that the process of preparing an information memorandum is an expensive affair. It shows to them that they are working with a committed seller. 

With investors receiving hundreds of proposals every year, this sort of commitment will only help your cause.

In Conclusion

You might feel that an information memorandum for investors is an unnecessary expense. On the contrary, it’s an important investment you are making towards finalizing the investment deal. As important it is to prepare an information memorandum, it is equally important to ensure it’s well researched and professionally crafted and structured. Hire a well-resourced advisor to prepare a high quality and convincing information memorandum for your business. It can make all the difference to your investment offer.

An information memorandum is an important document that an investor would request for. An information memorandum sets the base for your capital raising plans and throws light on the past, present as well as the future plans you have for your business. 

Here are some important headings you must include in your information memorandum. 

Letter to Investors This could be a Director’s Letter or a Chairman’s Letter. The letter must summarize your journey so far as a business and where the business is headed for. Keep the letter brief but pack in a wallop in every word for maximum punch. Keep it no longer than one page. 

Investment Highlights This is pretty simple. You could include a bullet list detailing the returns that investors could expect if everything goes as planned. However, it’s not only about the numbers. If you have an edge over the market in some form, highlight that fact too.

Executive Summary This is where you summarize the rest of your report. The executive summary provides a brief overview of the business and explains the reason why you’re raising funds. Investors can glance through this to get an idea of your proposal without having to read through the entire information memorandum.

Business Plan This section outlines your business plan. If your business has changed since you initially wrote the business plan, you might want to update it as necessary. You can include details such as success factors, your business model, the market dynamics and the corporate structure.

Risks The risk is very much a reality in every business. Even if you have established a monopoly, or are far ahead of the competition, your business is prone to risk. In this section, talk about the possible risks your business faces and what you’re doing to manage those risks.

Executive Team This is a good opportunity to showcase the kind of value your upper management team is adding to the business. Provide details about the board of directors as well as the advisory board members.

Investment Offer Time to get to the point now! Your investors want to know about the returns they will receive for their investment in your business. If the business is already showing healthy profits and the cash flow is positive, you could throw light on the earnings multiple as well as valuation. If you are a start-up with marginal revenues, focus on the strategic value.

Financial Statements Your investors would like to take a look at your operating history. Be sure to include the balance sheet, profit and loss statements and cash flow statements for the past two years at least. If you are a start-up without any history of previous revenues, then generate an estimate for these reports.

In Conclusion This outline should give you a clear picture of the kind of information you will need before you can start pitching for investment. You can choose to prepare this information on your own or for best results, hire a team that specializes in preparing information memorandum.

You have an investment meeting coming up. Your pitch is ready and you’re all set. You will need a top-notch information memorandum (IM) that you hand over to investors after your knock-out pitch.

An information memorandum is a short document outlining your business plan. Usually running for 20 to 30 pages, your IM includes projections, analysis and explanation that you could use to pitch to your investors without boring them to death.

Here are some essential aspects to cover in your information memorandum. 

Financials Be sure to include critical financials supported by explanations and pricing strategies. Include comments and notes where necessary.

Lease and Rental Terms What are the lease and rental terms? What is included? Are storage, car parking and outgoings included in the lease contract? What is the rent and what are the payables? What’s the GST component? If there are any unique aspects or improvements that are required in the office space, be sure to mention the same.

Equipment What sort of equipment will you require, whether you will buy the equipment, hire them or procure them on a lease? You might want to include comments for plants that are unique or are an integral part of the business. 

Payment Terms Do you have any special arrangements, deals and payment terms with your vendors? You can include information such as how do the orders will be placed, the frequency and why you have chosen the particular vendors. 

Marketing How would the business generate sales? Would you set up brick and mortar stores, an online store or would you distribute the products to merchants? What sort of marketing strategy will be in place? 

CRM What sort of CRM or database do you have and why? What does this system offer? Is it owned or licensed? How does this software help manage your business?

Staff Provide in-depth information about the staff, the number of people working, the staffing structure, the remuneration and the pay structure. The owner’s involvement plays a crucial aspect as the investors might want to identify how they might fit into the business. It is critical to demonstrate the owner’s role and how his role can be replicated or handled during the transition phase. If you can demonstrate that the staff is reliable and loyal, it will immensely help selling your business.

Location Where is the business located? Who are the target customers of your business? Demographics? Why do you believe this location works in favor of your business? It might be that it’s a street with high footfall, perhaps it’s centrally located or has easy access to car parking. No matter what it is, detail it in the comments. You might provide data about the area, its population and may even include a Google map here.

In Conclusion These are some important aspects to discuss in detail in your information memorandum. The purpose of an information memorandum is to show that investing in your business will be profitable for the investors. Support your statements with facts and figures.

An Information Memorandum is one of the most important documents of business. This document contains all the necessary details regarding the business that includes the future plans, possible threats and ways to overcome them. 

However, at times, there are chances that the brand fails to present perfect Information Memorandums before the potential investors. This can lead to severe losses in the capital, and thereby affect the business. Let us discuss some of the major mistakes that are seen in Information Memorandums.  The absence of One or More Directors While presenting the Information Memorandum before the potential investors, some companies make a mistake of not including the complete board of directors during the presentation. To convince the investors on how you are going to manage the funds and how bight the future looks, the complete board of directors should be present for the discussion.  Vague Plan Regarding The Funds When you prepare an Information Memorandum for investors, one of the key aspects to be included in it is the plan that you have to use the capital raised. When you fail to show the investors what you would do with the fundraiser, this may not be convincing to the investors. It is advised to have a clear idea of how you would spend each penny that is raised so that the investors would want to invest in your business.   Presenting Unregistered Services When a company presents an Information Memorandum, the services mentioned in it as a part of the company’s offerings are to be registered as per the Australian laws. If a service mentioned is not registered under the law, this is considered as a legal offense. Making a Private Offering Public When the company has several private offerings, it is illegal to publicise these offerings rather than presenting them to only the potential investors. These offerings are not to be advertising on public media like newspaper, TV or radio. The above mentioned are some of the major mistakes that are made my companies while preparing an Information Memorandum for investors. To avoid this, an accepted Information Memorandum template can be used to avoid future complications and loss due to the errors made in the document. Are you looking for reliable and trustworthy professional business plans and information memorandums to boost your business? Business Plans is one of the leading brands that offer business plans services in and around Melbourne in Australia. 

An Information Memorandum is one of the most important documents of business. This document contains all the necessary details regarding the business that includes the future plans, possible threats and ways to overcome them.