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What is an Information Memorandum
An Information Memorandum (also known as an Offering Memorandum), is a document usually written by a business (more often than not a private company) or its corporate advisors (such as Marshall Sterling), who is looking to raise finance through the issue (placement) of either equity or debt and is used to by the company to pass on information to potential investors when fund raising.
The “Information Memorandum” should provide a detailed overview of the company (the Issuer), the market it operates within, the objective for any funds raised and the risks associated with the proposed private placement or pre-public initial placement (pre-IPO).
When raising capital, access to the Information Memorandum (financial promotion) should be restricted until the eligibility of persons legally permitted to view and act upon the document has been obtained.
Unlike a Pitch Deck or Prospectus, the length of the Information Memorandum can vary significantly from as little as 10 pages up to 100 pages or more depending on the size of the company and the complexity of the proposition, be it Private Equity or Private Debt (Bond), and size of the target raise.
An Information Memorandum is a document that is required to be written, for a company to raise finance (fund raise) and typically includes the following:
- Regulatory disclosures regarding the type of prospective investor that can receive the Information Memorandum and those that cannot; further noting the requirement for a barrier to entry system;
- Geographical disclosures detailing which regions (or citizens) are prohibited for viewing and acting upon the private placement or public placement;
- Background history of the company (the issuer);
- The market the company operates in;
- What its products or services are;
- Who its customers are;
- How it differs from its competitors;
- What opportunities exist for the company;
- Reasons and background of the fundraise;
- Detailed financial history (latest set of audited accounts);
- Financial forecasts for the company showing how the corporate finance will be used and how it will be repaid (if the capital raise is via private equity, pre-initial public offering “Pre-IPO” or private debt aka Bond);
- Whether there are tax considerations such as whether the offer is SEIS or EIS eligible or approved (Seed Enterprise Investment Scheme or Enterprise Investment Scheme);
- Who the directors and senior managers are and what experience they have;
- The risks associated with the investment;
- What are the terms and conditions of the investment;
- Exit strategy for the potential investor, such as an Initial Public Offering (IPO / Stock Market Listing).
- Subscription agreement
An Information Memorandum in the United Kingdom is required by law to be written in such a manner that it is fair, clear and not misleading, and should specify that the Information Memorandum is classified as a Financial Promotion by the company, and if it is later found that the Information Memorandum is not fair, clear to the potential investors or was misleading in any way, the business (Issuer) and its directors could face material consequences.
The Information Memorandum should also include statements that the Information Memorandum is not a Prospectus and has not been prepared in as much detail as a prospectus, and the Financial Conduct Authority has not authorised it.
Furthermore, and subject to detail, the financial promotion may not be eligible to all investors or all geographical locations. In other words, prior to fund raising by way of seeking seeding capital, venture capital, private equity, private debt, and ultimately making the private placement or Financial Promotion available, eligibility of the prospective ‘viewer’ will need to be vetted and a gateway put in place to facilitate this.
Additionally, when receiving funds from prospective investors, there are a number of pieces of legislation that need to be taken into consideration such as The Proceeds of Crime Act 2002, The Money Laundering and Terrorist Financing (Amendment) Regulations 2022.
Given the importance of avoiding criminal prosecution, investor litigation, Regulatory censure and the potential financial impacts of poorly constructed and managed documentation, not to mention public perception and corporate brand awareness; a business seeking to raise capital by way of an Information Memorandum would be well advised to seek professional assistance of investment bankers or corporate finance advisers, such as Marshall Sterling.
Given the above considerations, each year at Marshall Sterling we assess hundreds of businesses globally.
Our team consists of high calibre individuals with pedigrees spanning decades at top Tier Investment Banks, Asset and Wealth Managers, Brokerages and Hedge Funds and subsequently, we are well positioned to review your business proposition, provide advice or guidance on your requirements and structuring options, and conduct the work required in a timely, cost effective and legally compliant and professional standard.
At Marshall Sterling, we are driven by long term relationships and your ongoing success is key to our philosophy, be it by way of additional rounds of private equity or private debt (bond) Issuance, stock market listings, merger, acquisition, or sale.
If you are interested in raising capital for your business and would like to discuss all the associated services we can support you with, such as Corporate Advice, Corporate Finance, Investment Banking, Capital Raising, Stock Market Listing, Crest and Euroclear facilities, Security Trustee, Share and Bond Registrars, please contact us using the form on this page and a member of our team will get back to you to arrange a time to speak.
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