The Information Memorandum

When it comes to a takeover; an Information Memorandum makes the difference An Investment Memorandum (IM), also called an Information Memorandum (IM) is supposed to be the company’s business card during a takeover. Unfortunately, a lot of IMs seem rather incompetent and uncompleted and often discourages investors. We would like to give you a few tips on what a good IM should include.

Did you know, that in the next few years around 20,000 – 25,000 companies will be confronted with a handover or a takeover? This means that investors will have lots of companies to choose from. It is very beneficial to impress the investors. The IM plays an important part in achieving this.

What is a must for an IM to trigger investors?

A professional look

Way too often, a company’s IM is not more than a few papers in which the company is described. This doesn’t seem very professional. Make sure the IM is presentable, it has to look perfect! Make sure to use pictures giving a good impression of the company. Graphs and other illustrations can be used to make the story more appealing to the investor. A professional first impression will attract investors.

Integrity and accurate information

An IM covers the company’s most important aspects. It is very important for the IM to provide an accurate view of what the company is like. During later research (Due Diligence), there can’t be any new information, antithetical to the IM or any other sources. Surprises must be avoided at all times. Surprises damage the trust during the takeover process and lower the chances of a final deal greatly.

Show the weak points

Investors don’t like “good news” shows. They prefer a complete and accurate view of the company they will (possibly) take over. Because of this, it is important to show the company’s weak points too. Make sure to include them in the IM and make sure they’re discussable. This doesn’t just create trust: investors see opportunities in a company’s flaws, sometimes.

Point out the growth

Investors are very interested in the company’s growth opportunities. Experience has taught us that there are unused opportunities for every company. Every manager knows one or more methods to realise further growth of their company. However, they have decided not to do this (due to a lack of resources, lack of ambition…). It is important to show this growth as tangible as possible in a business plan. Make sure that the growth looks realistic, or it might cause distrust, which will affect the company negatively. Include a realistic growth plan in your IM.

Enthusiasm

It is very important for the IM to show enthusiasm. Make sure to accentuate the company’s ‘value proposition’ at the start of the IM, in one page. This is meant to make the investor interested. However, the IM can’t just show enthusiasm. Make sure to bring a takeover attendant who can deliver the message appropriately, emits positive vibes and mainly; gain the investor’s trust. Enthusiasm is catchy and can affect the chances of a takeover positively.

Conclusion

If you, as a manager decide to sell shares in your company, then make sure to leave a good impression from the start. The Investment Memorandum (IM) is meant to be your company’s business card.

Before deciding to hire a takeover attendant/supervisor, ask them to show one or more IM’s from previous, closed takeovers. Decide for yourself whether the provided IM’s are professional enough. In case they aren’t; choose a different supervisor. It is important for a takeover, in order to be successful. Hope this is useful for you guys, good luck!