Information memorandum: what it contains and when buyers see it

What an information memorandum is

The information memorandum is the main selling document in a managed sale. Where the teaser is anonymous and fits on a page or two, the memorandum names the business and tells its story in enough depth for a buyer to form a view.

It goes by several names: IM, confidential information memorandum (CIM) or sales memorandum. The law firm Shepherd and Wedderburn describes it as a sales document intended to inform buyers and guide their bids, often prepared with a corporate finance adviser.

It is much longer than a teaser. IMAP, an M&A advisory firm, puts a typical memorandum at roughly 30 to 80 or more pages. Smaller businesses often have shorter ones; what matters to a buyer is that the content is complete and consistent, not the page count.

What it usually contains

Structures vary between advisers, but most UK memoranda cover these sections:

A memorandum normally opens with a confidentiality notice and a disclaimer saying who prepared it and that buyers must make their own enquiries.

When buyers see it

The memorandum comes after the NDA and before offers. A typical sequence:

1. Teaser to a chosen list of buyers, without the business’s name.
2. Interested buyers sign an NDA.
3. The seller, usually through their adviser, releases the memorandum to those buyers.
4. Buyers ask questions and some submit indicative offers.
5. The seller picks one or a few to go further, often with management meetings and access to a data room.
6. The chosen buyer runs due diligence before contracts are agreed.

Not every buyer who signs an NDA necessarily gets the same document at the same time. Where a possible buyer is a direct competitor, sellers commonly hold back the most sensitive detail, such as named customers or pricing, until later. The government-backed nibusinessinfo.co.uk guidance gives those two as examples of information to release once buyers have shown they are serious.

The financial section is where buyers spend their time

Most buyers turn to the numbers first. They expect three or so years of results, a version of profit adjusted for items that will not continue after the sale, and an explanation of each adjustment.

Here is an illustrative example, with invented round numbers. A memorandum shows adjusted EBITDA of £600,000, made up of reported EBITDA of £480,000 plus £120,000 of add-backs: £70,000 of the owner’s salary above a market rate for the role, and £50,000 described as a one-off legal cost. If a buyer’s accountants later find similar legal costs in the two previous years, they will usually treat that £50,000 as recurring, and the memorandum’s profit figure no longer stands. Our guide to EBITDA add-backs covers which adjustments buyers usually accept.

The other common problem is figures that disagree with each other: management accounts that do not match the filed accounts, or a customer share in the summary that differs from the appendix. Each one is small, but a buyer who finds two or three tends to question the rest.

Forecasts need the same care. Buyers generally read a forecast as the seller’s view rather than a fact, and look first at the assumptions behind it: which customers, what pricing, what new hires. A forecast that sets out its assumptions plainly, and shows how the current year is tracking against it, is easier for a buyer to take seriously than a single line of growth. If the year then falls short during the sale, the gap is usually raised in negotiation.

A memorandum describes the business and its results. It is not a valuation, and price is normally left to the buyers’ offers.

What the owner usually provides

Whoever writes the memorandum, most of its content comes from the owner. Advisers commonly ask for three years of filed accounts, current management accounts, a breakdown of revenue by customer, details of staff and key people, leases and major contracts, and a short account of how the business started and where it could go next.

The time an owner spends at this stage often decides how long the memorandum takes. Records that are already organised, with the add-backs explained and the management figures agreeing with the filed ones, leave the writer free to work on the story rather than chase the facts. The exit readiness checklist lists what owners commonly gather before a sale.

What a memorandum is not

It is not a contract. The disclaimer usually says the buyer must rely on its own due diligence, and the legal protections in a sale normally sit in the sale agreement itself, through warranties and disclosures negotiated later.

That does not make accuracy optional. What a memorandum says frames what a buyer expects to find in the data room, and a gap between the two tends to come up in negotiation. A solicitor can explain how the memorandum, the disclosure letter and the warranties fit together in your case.

How one gets prepared

Usually the seller’s corporate finance adviser or broker drafts the memorandum, working from the owner’s information, the accounts and interviews with management. The owner reviews and approves it before release. IMAP, the advisory firm cited above, says preparation typically begins before the teaser goes out and can take several weeks.

On teasr, teasr AI drafts the memorandum from one reconciled record of the seller’s figures, so the summary, the financial section and the appendices agree. If two figures disagree, drafting stops and says where. A person at teasr reviews each document before it goes anywhere. It is then released buyer by buyer once an NDA is signed, by the adviser running the sale or, on an owner-led sale, by the owner. See the sample memorandum or read how a sale runs on teasr.

This guide is general information. An adviser, accountant or solicitor can advise on what your own memorandum needs to include.