Creating a Compelling M&A Information Memorandum

From the perspective of a buyer, an effective M&A information memorandum presents a company they are eager to acquire. To achieve this, the information memorandum should exhibit several qualities:

1. Well-written: The memorandum must be well-written, as sloppy or excessive language indicates an amateur document and can deter investors. If the company's management cannot produce a well-written document, it raises concerns about their ability to manage a well-functioning company.

2. Well-presented: Similarly, the document's presentation is crucial. While the medium is not the message, it should convey professionalism. Hiring a professional designer for the information memorandum may not be expensive, but it can add significant value to a document used to sell a business.

3. Informative: The purpose of the M&A information memorandum is to sell the company, which requires providing relevant information to the buyer. Like when you wrote essays and used paper writing services to gather and present information, the M&A document should clearly explain why acquiring the company at the proposed price makes sense.

4. Transparent: A dishonest or non-transparent information memorandum can lead buyers to reject a transaction and create a negative image of the company within the industry. Ultimately, nobody wants to deal with a bad faith actor, whether they are buyers, intermediaries, suppliers, or clients.

5. Realistic: Avoid overestimating the company's potential due to entrepreneurial enthusiasm. When a memorandum claims a company is ready to become a billion-dollar enterprise, buyers will question why it is being sold.

What to include in an M&A investment memorandum:

The goal of the M&A investment memorandum is to sell the business. Include anything that encourages buyers to make a bid, while remaining honest and realistic. Most memorandums feature 5-10 chapter headings, such as:

1. Legal Disclaimer: Include a disclaimer at the beginning, stating the document's honest intentions and protecting the company from potential litigation due to errors.
2. Executive Summary: Provide a 1-3 page summary of the document's key points for readers with casual interest.
3. Business Outline: Offer a detailed description of the company, its products, services, or intellectual property. Keep it simple and easily understandable.
4. Market/Industry Overview: Present concise overviews of the company's market and industry, as well as prospects for the next 3-5 years.
5. Management Overview: Include information about the management team the buyer will acquire and the owner-manager's willingness to stay on after the transaction.
6. Business Model: Explain how the company operates and will continue to function after the transaction, as well as its strategy.
7. Sales and Marketing: Discuss the effectiveness of the company's sales and marketing efforts, and how increased investment can generate higher revenues.
8. Financial Overview: Provide financial statements, such as income statement, cash flow statement, and balance sheet, for the previous three years. Proforma financial statements can be valuable for potential buyers.

The one-page teaser:

Before sending the M&A information memorandum, it is customary to send a one-page teaser. This non-confidential summary should pique the buyer's interest without revealing sensitive information. Interested parties can then be evaluated for transaction suitability and sent a confidentiality agreement before receiving the M&A investment memorandum.