Information memorandum

What it means

An information memorandum is a detailed document about a company for sale that an adviser prepares for serious buyers after they sign a non-disclosure agreement. It covers the company's history, market, products, customers, organisation, financial results and future plans.

It is preceded by a short anonymous teaser that approaches potential buyers without revealing the company's name. Those who show interest and sign the NDA receive the memorandum and submit non-binding indicative offers based on it.

The memorandum is both a marketing and an information document: it should present the company in the best light, but truthfully. It is the basis for initial offers before due diligence, in which the buyer verifies the data in detail in the data room.

How it works in practice

A good memorandum explains the business model, competitive advantages, key risks and growth opportunities. The financial section includes historical results for recent years, EBITDA adjusted for one-off items and a plan that supports the expected valuation.

After assessing indicative offers, the seller selects a shortlist of buyers who get data room access and management meetings. The best then submit binding offers, and a letter of intent and later a purchase agreement are signed with the winner.

In smaller deals, such as selling a family business, the memorandum may be simpler but should still cover the essentials. A well-prepared document saves time, reduces questions and filters out buyers who would not have been suitable anyway.

What to watch out for

False or misleading information in the memorandum can make the seller liable and give the buyer claims after the deal. Purchase agreements therefore usually contain representations and warranties, and the memorandum should be consistent with what the buyer sees in the data room.

The memorandum contains sensitive information that should not reach competitors or employees prematurely. When approaching strategic buyers, who are often competitors, carefully consider what to disclose at which stage and keep track of who has received the document.