Information memorandums are documents used in mergers and acquisitions to present information about the business. Although they are not the same as a business plan, they share a lot of similarities. As business plans are typically more common and therefor better understood, it is easier to understand an Information Memorandum when comparing it to a business plan.
Goal
The similarities begin with the goal of the information memorandum and the business plan. The goal of the information memorandum is simple. It is to interest buyers so that the business can be sold for the best price possible. The goal of business plan is not as straightforward. A Business Plan can be used strictly as an internal road map.
However, in most cases, whether it is used to apply for bank loan, recruit investors, or bring on additional founders, business plans are about “selling” the business. Not in the literal sense as with the information memorandum but, in the sense that you are convincing others the business is a good venture and will be successful.
Components
Business plans and information memorandums are so similar that many of the main components of the documents will be the same.
Executive Summary – In both the business plan and the information memorandum, the executive summary will be the first section and is a very brief overview and introduction to the entire document.
Company Overview – Regardless which document you are preparing, you need to give an overview of the business. This may differ slightly in a business plan if the business in not yet established. However, for a business plan for an established business and an information memorandum, this is where you will share history including topline financials, current client base, and other vital information on what the business does and how it does it.
Products/Services – At the core of any business is the product and/or services it offers. These need to be explained for a potential buyer in an information memorandum or for potential investors, loan officers, or other interested parties in a business plan for them to truly understand the business.
Company & Employee Structure – This usually focuses just on management but, can encompass all staff depending on the size of the business. Although the audience of a business plan won’t typically have a say in restructuring the business, in an acquisition or merger they almost certainly will, which is why this information is so important in the Information Memorandum.
Market Overview – The market overview is another component that will be found in both an information memorandum and a business plan. In both instances, this is based on extensive Market Research which will be required for both types of documents. You can never truly understand a business if you don’t understand the overall market in which they operate.
Financials – This is another core component of any business presentations whether that is a business plan or an information memorandum. Historical figures will be presented along with supported future projections.
It is easy to see that a Business Plan and an information memorandum actually have more in common than differences. At the end of the day, both documents are about presenting the key, vital information about a business to an outside party in the best light possible.
No comments:
Post a Comment