The information memorandum (IM) is the document that presents your company to prospective buyers or investors: business model, brands, sites, team, financial information and growth potential. It speeds up the sale because it answers in one go the questions every buyer would otherwise ask separately, and it allows offers to be compared on the same basis. In Spain it is known as the cuaderno de venta.
What a company’s information memorandum is
When an owner decides to sell, in full or in part, interested buyers need to understand the business before making an offer. The information memorandum gathers that information in an orderly format written for the reader: someone who does not know the sites, the team or the history of the brand.
It is given only to counterparties that have shown genuine interest and have signed a confidentiality agreement. Before that, a short, anonymous document, sometimes called a teaser, usually goes round describing the opportunity without revealing the company’s name. The memorandum comes afterwards, and it is what allows the buyer to decide whether to submit an indicative offer.
In hospitality it has a particular role. Much of the value lies in things the accounts do not show, such as the brand, the quality of the sites or the ability to open new units with the same success. The memorandum is where those are explained and documented.
What an information memorandum includes in hospitality and restaurants
There is no compulsory table of contents, but a solid memorandum for a restaurant group or an F&B brand usually covers these sections:
- Summary of the opportunity. What is for sale, why and on what general terms, in a few pages the buyer can read first.
- History and business model. How the concept came about, which customer it serves and how it generates revenue.
- Brands. Proposition, positioning, recognition and what sets them apart from the competition.
- Sites. Each location with its address, floor area, lease position, licences and trading history.
- Team. Organisation chart, key managers and how the operation runs day to day, with attention to dependence on the owner.
- Financial information. Accounts for the last few financial years, results by site, normalised EBITDA with its adjustments explained, and cost structure.
- Growth potential. Possible openings, new markets, channels or formats, and what it would take to develop them.
- Process. Expected timetable, next steps and how offers should be submitted.
Why a good information memorandum speeds up the transaction
Without a memorandum, every interested buyer asks for information on their own account, in their own order and at their own level of detail. The owner spends a great deal of time answering the same questions while still running the business. Conversations move at different speeds and proposals are hard to compare.
With a well-prepared memorandum, every buyer starts from the same information. The offers that come in can be compared because they rest on the same data. Follow-up questions are more specific, and due diligence throws up fewer surprises because what matters was explained at the start.
It also has an effect on price. A buyer who understands the business well takes on less uncertainty and has fewer reasons to discount for risk. A memorandum that clearly explains the strength of the brand, the soundness of the sites or the ability to replicate the model helps to defend the valuation during the negotiation.
The information memorandum and confidentiality
One of the owner’s most common worries is that news of the sale will reach employees, suppliers or competitors before its time. The memorandum is part of the answer to that worry, because it allows you to control who receives what information and when.
The usual practice is staged. First, an anonymous presentation. Then the memorandum, only to qualified counterparties that have signed a confidentiality agreement and with the owner’s authorisation. The most sensitive information, such as specific contracts or staff data, is held back for later stages, once the buyer has shown firm interest.
How to prepare the information memorandum: steps and common mistakes
Preparing the memorandum forces you to put the company in order, and that exercise is useful even if the sale takes time to arrive. These are the usual steps:
- Gather the financial information. Annual accounts, results by site and a breakdown of costs, reconciled and consistent with one another.
- Normalise EBITDA. Identify the income and expenses that are non-recurring or that do not reflect the real operation, and document every adjustment.
- Review the leases and licences. Terms, renewal conditions and assignment clauses for each site.
- Describe the team and the operation. Who does what, and how the business would run if the owner stepped away.
- Explain the potential. With arguments the buyer can verify, and no projections that cannot be backed up.
- Write for the reader. A clear document, with the important points first and the detail in appendices.
And these are the mistakes that come up most often:
- Promising growth the historical data does not support. The buyer spots it and distrusts everything else.
- Leaving out known problems, such as a lease about to expire or a site with weak results. They will surface in due diligence, and it is better to explain them first.
- Supplying figures that do not match the statutory accounts.
- Writing for the owner rather than the buyer, with operational detail that does not help anyone decide.
A document prepared with sector judgement
At Link Capital we prepare the information memorandum and the rest of the investor documentation as part of the sale process, alongside the valuation of the company and its brands and the search for buyers across our network in Europe, Latin America and the Middle East. We have the operational backing of Linkers to explain the business through the eyes of people who have run restaurants. You can see the full process in our hospitality and F&B M&A service.
If you are considering selling your company or bringing in a partner, a Link Capital partner can help you decide what information to prepare and in what order. All information is treated in the strictest confidence and we reply within two working days.