Day 2 – Selling a Business

In the second of our five day series, our Corporate Finance team look at managing your selling documents.

A key part of the sales process is the production of the selling documents: the ‘teaser’ and the Information Memorandum (‘IM’).

The ‘teaser’ is an anonymous one page flyer that acts as a precursor to the IM. It is circulated to an agreed list of potential purchasers to gauge interest in the acquisition opportunity. The teaser is as confidential as possible to attract interest whilst protecting the identity of the company, giving each interested party just enough information to make them want to learn more. The teaser is issued alongside a non-disclosure agreement that should be signed and returned if more information is required.

The IM is co-written by management and the Corporate Finance Advisor following detailed information sourcing and financial analysis. The IM is drafted to make the business attractive by highlighting important key features and should also demonstrate the route for potential future growth and the opportunity for financial improvement post sale.

The size of the IM will depend upon the nature and complexity of the business being sold. The skill is in providing sufficient information to excite the interest of prospective buyers whilst limiting sensitive information whose disclosure may damage the business.

At this early stage in the sale process confidential information should be kept out of the IM. It can be released at a later stage in the sale process, to serious potential buyers only.

Often the initial reviewer of the IM will make a decision and the initial reviewer may only have a short period in which to review the document before deciding to reject it, or pass it to a colleague for a more detailed analysis. Therefore, the executive summary and key selling point sections of the document must be positive and punchy.

It is possible to produce several different versions of the IM, tailored to a range of specific buyers. In some cases, particularly when a trade buyer may be interested, it could be worthwhile highlighting potential synergies between the two companies. This can add significant value in a transaction.

Whilst it is very unusual for a potential purchaser to make a final decision on the basis of an IM, a well prepared and presented IM has a much higher chance of achieving a sale than a quickly drafted document. Time spent on preparing/tailoring the IM is always rewarded. The main purpose of the document is usually to bring a purchaser to the negotiating table to submit an indicative offer.

For further information about the production of selling documents, please contact a member of our Corporate Finance team.

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