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Stacked documents | AccountingWEB | Selling a business: Why the IM has to be spot on

Selling a business: Why the IM has to be spot on


For those looking to sell a business, the information memorandum is vital for attracting serious buyers. That's why it's important accountants put in the hours to get it right.

20th May 2024
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The information memorandum (IM) is the document or booklet that prospective buyers need in the first instance to decide if an acquisition is worth pursuing.

It is only sent out to vetted genuine buyers so it isn’t simply a “nice to have” item, it is central to the sale process.

Whilst the IM will naturally list much of the headline financial data it should also tell a precise and accurate story of the business, both in terms of its history and its current situation, as well as tempting a buyer with opportunities that beckon.

What should the IM include?

Typically they are only produced in pdf format, it will often be advisable to have a hard copy finished to a high standard. After all, if the business is being pitched as a quality operation that story will carry across to a good quality print version.

Buyers are busy people, often looking at dozens of IMs in a month or even more frequently, so the vital statistics and key elements of the story should be quick and easy to read, with charts and tables backed up by pictures of people, products and assets.

Prospects will also want a summary of customer numbers, product lines and the staff structure.

As you can imagine this takes a lot of time and effort but nothing beats a well-crafted IM, which will by necessity involve a number of parties led by the broker.

Don’t cut corners

However, it is precisely because there is so much time involved in the creation of the IM that it is tempting for the business owner to cut corners, whether it is being economic with the truth, using poor quality or outdated pictures, or guesstimating a figure that ought to be known.

Given that even the best businesses can take time to sell, it will reward you well to ensure that the IM is up to date especially if another year end has passed or the trading performance has changed materially.

In the property market a fundamental mantra is “location, location, location”, and when preparing an IM the equivalent is “check, check and check again”.

Replies (3)

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David Ross
By davidross
21st May 2024 08:49

Information Memorandum - a useful addition to my vocabulary

(Text Stack was the last, also from AW)

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Replying to davidross:
By FactChecker
21st May 2024 18:52

Text Stack - is that when all your emails are printed out and placed in your in-tray?

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Replying to FactChecker:
David Ross
By davidross
23rd May 2024 11:24

It was predictive teching that done it

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