Knowledge base item

An information memorandum, what's that?

The fullest possible picture of the company

When selling a company, the company will first have to be presented to potential buyers. The information memorandum plays an important role in this process. The information memorandum (IM) is a document that is prepared to give potential investors or buyers an extensive overview of the company. It is important to paint the fullest possible picture of the activities, obligations, strengths and weaknesses. The purpose of an IM is therefore to inform the interested party as completely and correctly as possible, so that he or she is able to determine an initial price or price range without further questions after reading the IM.

Why is an information memorandum so important?

Firstly, it ensures that potential investors or buyers can form a picture of the company in a simple manner. This allows them to determine with limited effort whether they want to pursue the process. Low transaction costs will ensure that a larger number of interested parties will come forward. Naturally, several interested parties are favourable to the sale of the company. Furthermore, an IM offers the opportunity to showcase the company's "key selling points. It is crucial that potential buyers or investors do not overlook these company-unique strengths, and more importantly, see the value in them. The IM must show what makes the company distinctive in order to capture the reader's attention.

In addition to highlighting the strong points, it is also important that the points for attention are included in the IM. By ensuring that all of the points of interest are known in advance, the IM ensures that interested parties can form an opinion more quickly. It is important that no discussion can arise about negative features that are only disclosed at a later stage, or even worse, are discovered by the buyer himself. A potential buyer or investor does not want to be confronted with big surprises. Trust is the basis of a sustainable transaction.

What does an information memorandum contain?

Generally, the IM contains all the items necessary to form a good picture of the acquisition. These include:

  • Internal analysis, covering the company's products, services, history and customers.
  • External analysis, analyzing the market.
  • The legal structure.
  • Employee organization.
  • Financial information including forecasts.

Drafting an information memorandum is an extensive and time-consuming process, in which a good substantiation of statements, assertions and starting points are of great importance. Florijnz has the necessary knowledge and expertise to assist you in this process.

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Stef Kolen
Stef KolenCorporate Finance Advisor

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