An Information Memorandum vs a Business Plan
A business plan is usually an internal document for existing stakeholders (management, owners, and the Board) that outlines the company's mission, goals, core strategies, business model, and detailed plans for its core Functional Areas of Business (FAB). These overarching FABs typically include marketing, operations, and finance. A business plan helps the management team stay focused and communicate the company's vision to employees.
On the other hand, an Information Memorandum (IM) provides a detailed overview of the mission, core strategies, business model, company's operations, financial performance, market position, outlook, financial forecasts, and prospects. It aims to help potential investors make informed decisions regarding the proposed application of funds toward seeding an idea or business model, growth, mergers and acquisitions (M&A), or to facilitate a specific transaction, such as purchasing real property or plant and equipment.
Equity Raisings
Private investors can include appropriately qualified family and friends or structured private investors like professional investors, venture capital funds, and private equity funds. An Information Memorandum can be used to raise seed funding, growth funding, and more formal Series A, Series B, and Series C "rounds"—a term used in venture capital speak. In the private equity sector, an Information Memorandum can be used to raise funds for acquisitions, mergers, or even acquisition merger-growth plays.
An important component of an Information Memorandum for equity investors is detailing the current (pre-funding) and proposed (post-funding) ownership structure of the company following the raising of capital. The Information Memorandum typically addresses pre-money and post-money valuations, shareholder ownership percentage, and any key terms of any shareholder agreements, such as shareholder risk mitigation measures for the new incoming investors like diluting ratchet clauses. An Information Memorandum usually details potential exit scenarios to show how the investors might get their money back with a return on capital in line with the risk. Exit scenarios can include a trade sale, a merger with a publicly listed company (so the return can be accessed via the sale of shares in the acquiring company), or an Initial Public Offering (IPO) of the company.
Debt Raisings
An Information Memorandum (IM) is the perfect tool for raising funds via structured debt. Unlike an equity-based IM, it addresses commercial terms such as first, second, and floating registered securities, the ability of free cash flows to meet interest and any principal reductions, and, in some instances, Put & Call Option instruments to convert the debt into equity if certain milestones are reached or at the request of the lender.
Debt Facility Renewal
Evahan is experienced in preparing Debt Facility Renewal Memoranda. These Information Memoranda are prepared for bank and non-bank debt lenders and aim to renew or rollover existing business debt facilities, such as secured principal and interest term loans, interest-only facilities, working capital facilities like an overdraft, and hybrid debt instruments like convertible notes. Most debt lenders require borrowers to provide information to finalize the renewal or rollover of the facility, as specified in the debt facility agreements.
For a detailed understanding of the typical table of contents of such an Information Memorandum, click on our Debt Facility Renewal Memorandum insight article.
Experience
An Information Memorandum is a vital tool utilized in all three stages of the business cycle that Evahan supports: Venture and Project Commercialisation, Strategy & Operation Improvement, as well as M&A, Succession, and Restructures. Evahan's expertise in preparing Information Memoranda for raising debt and equity, along with providing commercial updates to existing lenders, can be explored here.
