The situation
A second generation textile family in Surat has decided to sell its processing unit. Their adviser has a list of possible buyers and asks the family for two documents: a one page teaser and an information memorandum, usually called the IM. The family has never written either. They want to know how much to say, how to describe the numbers, and what happens if a buyer later finds something the IM did not mention.
Teaser first, IM after the NDA
The teaser is a short, anonymous summary sent to possible buyers before they sign anything. It describes the business in general terms: sector, region, size band, what makes it attractive, and the kind of deal the owners want. It should not name the company or include anything that lets a reader guess it easily.
The information memorandum goes only to buyers who have signed an NDA and shown real interest. It is a fuller description of the business, usually twenty to forty pages, written to help a buyer decide whether to make an offer.
What an IM usually contains
The business in plain words
What the company makes or does, for whom, where, and how it has grown. A short history helps, but buyers care most about the last three years and the next three.
Market and customers
The market the business sells into, the main competitors, and the customer base. Show concentration honestly: if the top five customers account for half the revenue, say so and explain the relationships.
Operations and people
Plants, capacity, key equipment, suppliers, systems and the management team. Buyers want to know who runs the business day to day and what happens if the owner steps back.
Financials
Three years of summary profit and loss, balance sheet and cash flow, with the current year to date. Show adjustments separately: if you add back a promoter's personal expenses, list each one with the amount. Projections, if included, should state their assumptions.
The opportunity and the process
Why the owners are selling, what kind of deal they are open to, and how the process will run: dates for indicative offers, management meetings and the data room.
Write it so diligence agrees with it
Everything in the IM will be tested in diligence. A number that does not match the audited accounts, or a customer described as long term whose contract ends next month, damages trust more than the underlying fact would have. A few rules help:
- Use figures that tie back to audited accounts or management accounts the buyer will see.
- State problems you know about in a sentence, with what you are doing about them.
- Avoid adjectives that cannot be checked. Words like "leading" and "unique" invite questions.
- Date the document and say which figures are audited and which are not.
What to leave out
Detailed customer names and prices, employee salaries and personal data do not belong in an IM. Summaries by segment and band are enough at this stage. Detail goes into the data room later, to the people who need it, with access recorded.
A short checklist
- Teaser written without the company name or identifying details
- NDA signed before the IM is shared
- Financials tied to audited accounts, adjustments listed
- Known issues stated plainly
- Distribution recorded: who received which version, and when
Where Synerger fits
On Synerger, the buyer list sits in the deal pipeline, the NDA status is tracked per buyer, and the IM is shared through the data room so you can see who opened it. For drafting help, see our mergers and acquisitions advisory.
General information; have your lawyer review the NDA and any disclaimers in the IM.