What is an Information Memorandum ?
An Information Memorandum is also Known as or the stages to Infomation Memorandum (IM) is :
1. Teaser
2. Preliminary Information Memorandum (PIM)
3. Confidential IM
OR
Placement Memorandum
Meaning :
Basically an IM is a summarized document having comprehensive data or information about the company or project which requires fund or non fund based facilities.
It is specially made for a Lender and/or Investors. A start-up makes a Pitch Deck but at the end in documentation procedure an IM is filed.
We will learn in details about IM by understanding all the components of an Information Memorandum !!
The Information Memorandum has following Heads/Sub-Heads/ Components :
Basically the IM has the information which is specifically required by the Lenders/Investors to understand and execute the fund or non-fund based facilities (in simple language a Loan or Debt or Term Loan or Letter of Credit or Performance Guarantee)
An IM which is also called as Placement Memorandum is used to file applications to Stock Exchanges for setting up an AIF or any other Fund or Listing purposes of different instruments.
1. Executive Summary
Executive summary is a summarized list and explanation of the whole Information Memorandum. It has all the heads and sub-heads of the IM and a summary.
Why is Executive summary important?
Not all the professionals in the Lenders/Investors office will have time and energy to read whole document which may range from 50-200 pages. And after years of experience many senior professionals don't need detailed data they can understand the deal for the summary.
And one can understand that all the key points are covered in the IM or not from the Executive Summary itself, it's a very useful and important component of the whole IM.
2. Table of Content, Table of Tables and Abbreavations
Table of Content which connects all the content of the IM which helps a lot and a well mapped documents which has good navigation process makes a well respected and strong document which creates an impact not only about the person who prepared it but also about the company/start-up /project.
Table of Tables is another help in an navigation of core details which are captured in a table and specially financials is what people look for in a table and any evaluation related to the same.
So keep a check and do insert a nice, easy to understand and mapped Table of Tables.
Your document should have all abbrevations at one place, all the short forms and meanings everything, like you shouldn't expect from a reader to know everything you have researched and understood. So basically all the difficult words should be at one place.
Now we will see all the main heads and there content that should be there for buiding a better and great useful IM.
3. Introduction
To intoduce and make people understand who you are and what you do, things should be at one place that is introduction. It's like a recipe you can't tell people to put cheese on top until you tell them what the base was.
Simply the cheese is the investment or funds you are looking for, for which you preparing this IM. The base is what you have already built and what you have already worked on to make it worth of putting cheese on it.
Basically the Introduction has :
- The full name of the company/start-up/project
- How it started; what are the important things happened in between which impacted the organization to an extent.
- Who are the promoters ? Did they changed and how much was the change and what was the reason for the change ?
- What are the current Products and Services and how they are impacting the society ? How they are helping the environment and people.
The above are few examples of what can be included it can change on case to case basis.
4. About the Promoter/Founder
Next comes is telling about the Promoter or Founder of the company/start-up/project :
- Name
- Qualifications
- Experience
- Achievements
Why all these are important ?
As a Lender/Investor, they don't only bet on the performance and idea of the venture but on the person and management running the same. If the person has right qualifications and experience the Lenders/Investors confidence boost to write a cheque.
It is really important to highlight the good thing about your Promoter/Founder but it is also important to bring forward anything that you feel is important to disclose and which is not a good thing about the Promoter/Founder. Rather than waiting them to ask, tell them things upfront and it will create a strong relationship.
5. About the Key Managerial Personnel (KMP) and Directors
Why writing about the KMPs' and Directors are important ? It's because these people are those who runs the company and knowing about them builds the image of the company.
What all is required to be included ?
1. Name
2. Qualification
3. Date of Birth
4. Experince and it's details
5. DIN or other Membership Numbers
Any of the important achievements that they have for building goodwill of the company.
6. Shareholding and Recent Fund Raise Summary
Shareholding and it's detail is very important for an Investor specifically. But equally important to a Lender also !! They both need to know who promoted the company and are they still in the company or have exited. Who are the new Institutional Investors and How much does the actual Founder/Promoter invested in the project.
Whole shareholding pattern should be in the Information Memoradum, and beautifully prepared for easy understanding.
You can use pie charts and other charts for the description of numbers and investors/shareholders.
Keep in mind to showoff any currrent fund raising that have happened which again build the confidence of the Fund provider. Or you can make a table or list of the fund raising happened since the incorporation of the Company/Project.
7. Management and Board of Director
Introducing and showing the skills and work experience of your Board of Directors and Managerial people is important. If you know about filing loan applications of a size of ₹ 500 - 1000 Cr. there they have a mandatory section of Board of Director and Management name, qualification, age, and work experience in words and no. of years.
Why is it important to do that? Because an idea will not work without the right people, a venture will not run without the right set of people with the right experience. It is really important for the draft man of the Information Memorandum that they include all the information of the Board of Directors and KMPs.
You have to make a knowledgeable document so that the Lenders/Investors have every information that they can think of.
