What Is an Investment Memorandum? IM, CIM and Teaser Explained

What an investment memorandum is

An investment memorandum is the document a seller — or, more usually, the seller's adviser — prepares to present a business to prospective buyers once they have signed a non-disclosure agreement. It describes what the company does, the market it operates in, its customers, operations and management, and its financial history, and it sets out the transaction on offer and the process for bidding. Its purpose is to generate indications of interest at the highest price the market will credibly bear.

The name varies. In the UK mid-market the same document is usually called an Information Memorandum, or IM; in North American processes it is a Confidential Information Memorandum, or CIM; and "investment memorandum" is used for it too, particularly where the business is being presented to investors rather than to trade buyers. The phrase is also used for the internal paper a buyer writes for its own investment committee; this guide is about the sell-side document, and the committee paper is covered at the end.

IM, CIM and teaser: how they differ

The IM and the CIM are the same document under two names. The teaser is a different document with a different job, and the difference is confidentiality.

A teaser that can be identified — a business described as the only firm of its kind in a named town — has failed at its one job, and a buyer who can name it has learned something about the adviser. An IM that is still anonymous has left out what the buyer signed the NDA to see.

Where each sits in a sale process

The documents mark the stages of disclosure in a sale, and each one gates the next.

1. The teaser goes to the long list of buyers the adviser has selected: enough to establish interest, not enough to identify the seller.
2. The NDA is signed by the buyers who want to see more. It is the price of admission to the memorandum, and it is what allows the seller to be named.
3. The IM goes to the buyers under NDA, with a date for indications of interest. Buyers analyse it, put questions to the adviser and decide whether to bid.
4. Indications of interest come back: a non-binding statement of the price range and structure a buyer would consider. The adviser shortlists on them. LOI vs IOI explains what each document commits a buyer to.
5. Management meetings and the data room follow for the shortlisted buyers: the people behind the memorandum, and the evidence behind its figures.
6. A letter of intent from the preferred buyer, then exclusivity, diligence and the transaction documents.

Not every process runs in this order — a single-buyer approach may skip the teaser, and a small sale may merge the IM and the data room — but the logic holds: each document discloses more than the last, to fewer people, in return for a firmer commitment. M&A deal pipeline stages explained maps the same sequence from the buyer's side.

What a good IM contains, section by section

The order below is the conventional one, and it exists because the sections build on each other: the reader needs the model before the market, the market before the numbers, and the numbers before the transaction.

1. Executive summary. The business in a page: what it does, for whom, the headline figures, the reason for sale and the transaction proposed. A buyer who reads nothing else should be able to say whether it fits.
2. Investment highlights. The case for the business, as claims — each one specific enough to be tested against the sections that follow.
3. History and ownership. When and how the business was built, who owns it, and why it is for sale now.
4. Products, services and customers. What is sold, how it is priced and delivered, and the customer base with its concentration and contract terms.
5. Market and competition. The size and direction of the market, the named competitors, and the position the business holds with the evidence for it.
6. Operations. Sites, property, plant, systems, suppliers and capacity — and what investment the next stage of growth would need.
7. Management and people. The organisation chart with tenure, who stays after completion, the owner's actual role, and headcount by function.
8. Financial history. Revenue, gross profit and EBITDA by year, with each year labelled as audited, unaudited, management-prepared or forecast; the balance sheet; working capital and capital expenditure.
9. Adjusted earnings. The bridge from reported to adjusted EBITDA, with every adjustment listed individually and the reason for each.
10. Forecast. The projection, with its assumptions stated, and labelled as a projection.
11. The transaction and the process. What is for sale, the basis of any guide price, the timetable, what an indication of interest must contain, and who to contact.
12. Appendices. The statutory accounts, the management accounts, and any supporting schedules the narrative relies on.

The appendix is where the memorandum earns or loses credibility. A narrative that quotes figures the appendix does not contain, or contains differently, tells a buyer that the two were written at different times by different people.

How buyers read an IM, and how sellers write one

A seller writes a memorandum to advocate. The figures are accurate — an adviser who puts a false number in one has a short career — but which years to show, which adjustments to make, which risks to mention and what to leave out are choices made by the side that wants the highest price. A buyer reads it knowing that, and How to analyse a CIM sets out the method: extract the facts before forming a view, challenge the story against them, price on the facts, and decide with the reasons written down.

The two readings meet at the adjustments to earnings and at what is missing. The seller presents the adjusted figure as the earnings of the business a buyer will own; the buyer rebuilds it sceptically and prices on the result. The seller decides what not to include; the buyer treats every expected disclosure that is absent as a question. An adviser who understands the buyer's reading writes a better memorandum: a claim the buyer can test and confirm is worth more than one they cannot.

The adviser's job in producing it

Producing the memorandum is most of the adviser's preparation phase, and its quality sets the tone of the process. The job has four parts: getting the figures right, so that every number in the narrative reconciles to the appendix and every adjustment would survive a buyer's accountant; making the case, with specific highlights, an evidenced market and the risks acknowledged rather than hidden, because a risk a buyer finds for themselves costs more than one the seller disclosed; keeping it consistent from the executive summary to the appendix; and running the process around it — the buyer list, the NDA, the timetable, the questions that come back and the data room that follows.

For a firm running several mandates at once, the recurring risk is repetition: the last deal's template with this deal's figures typed in, one of them from the wrong year. TrueValue's adviser workspace is built partly to remove that failure — see below.

Common weaknesses

• Adjusted EBITDA far above reported EBITDA, with the bridge summarised as one "normalisation" line
• A forecast in the same table and the same format as the historical years
• Customer concentration described — "a loyal, diversified base" — and never quantified
• A reason for sale that the financial trajectory contradicts
• A figure in the narrative that the appendix states differently
• Highlights that are adjectives — market-leading, sticky, significant upside — with nothing behind them

Each costs the seller in the same way: a buyer who finds one reads the rest more slowly and prices it lower. The memoranda that hold their price anticipate the buyer's questions and answer them in the appendix.

The IM, the data room and diligence

The memorandum is a claim. The data room is the evidence for it: the contracts, the accounts, the leases and the employment terms the narrative summarised. Diligence is the test — the buyer's own verification of the claims against the evidence, usually with accountants and lawyers, after a letter of intent has given them the exclusivity to spend the money.

Two consequences follow. Nothing in the memorandum is verified until diligence verifies it, however well written it is. And a memorandum is generally issued with a disclaimer against reliance; what a buyer can rely on is a matter for the transaction documents and their legal advisers. The practical rule is that the questions a memorandum raises become the first tranche of the diligence request list, which is where "the document says" turns into "the evidence shows".

How TrueValue drafts IMs and teasers, and reads received CIMs

For advisers, TrueValue drafts the information memorandum and the teaser from the deal record rather than from a blank template. The AI writes the prose from what the record holds — the extracted accounts, the valuation and its drivers, the notes, the people — and every figure in the draft is written over from the record, never from the model. Each period is labelled with what it is worth — filed, management-stated, or a projection, never trading history. Nothing is estimated: if the record does not state a figure, the field is left blank and the dialog says so, and it warns when the draft rests on anything weaker than filed accounts. People reach the draft as name and role only. The draft is edited section by section and versioned on the deal. M&A document management covers the builder, the clause library and the templates.

For buyers, the CIM Analyzer reads a received memorandum into a structured first pass: each financial year's revenue, gross profit, EBITDA, add-backs and SDE, recurring revenue share, customer concentration, owner involvement and growth rate, with every figure linked to where it was read and "not stated" where the document is silent. The business is scored against the buyer's acquisition mandate with unknowns flagged rather than penalised; the strengths, red flags and missing information are listed as findings; and the stated figures run through the same five-method valuation engine as a full valuation. The discipline is the same on both sides: a figure comes from the accounts, or it is not stated.

The other investment memorandum: the buyer's IC memo

The same phrase is used for the paper a buyer writes to its own investment committee to recommend a deal: the thesis, the valuation, the structure and returns, the diligence findings, the risks and what would make the recommendation wrong. It is the sell-side memorandum's mirror image, written by the sceptical reader for a more sceptical one. In TrueValue the IC memo is headed by a deterministic fact pack, each fact cited to its source, with a Missing Information section and a What Would Make This Wrong section.