Your Information Memorandum is Competing Against a Thousand Others. Most Sellers Don't Know That.

An information memorandum is the document that introduces your business to potential buyers. The name makes it sound like a filing exercise. It isn’t. It’s the most important sales and marketing tool in your entire exit — and most sellers don’t treat it that way.

 

A few years ago, I sat across from the head of acquisitions at one of the larger private equity firms in South Africa. We were talking about a business we’d brought to him, and I asked a question I already knew the answer to: how many information memorandums does your team see in a year?

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He didn’t hesitate. Roughly a thousand.

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His team reads them the way you’d scan a newspaper. Most get thirty seconds. A handful get a second look. A very small number get a phone call.

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That conversation changed how I think about every IM we produce.

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You’re in a competition you didn’t know existed

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Most business owners preparing for an exit don’t think of themselves as being in a competition. They think about their numbers, their team, their growth story. They think about what their business is worth. What they don’t think about is who else is on that buyer’s desk the same week.

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But that’s the reality. Your IM lands alongside dozens of others. The buyer isn’t comparing your business to nothing — they’re comparing it to everything else they’ve seen that month. And most of what they’ve seen is forgettable. Competent, accurate, professionally produced — and completely indistinguishable from the one before it.

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An IM is a sales and marketing tool. Most people treat it as a filing document

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Here’s where the thinking goes wrong. A business owner sits down with their advisor and says: “Tell the buyer what we do.” So the IM describes the business. It explains the product. It outlines the management structure. It presents the financials. It’s thorough and factual and reads like a compliance document.

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That’s a filing document. It’s not a sales tool.

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Think about it differently. Say you’re selling a company that installs and maintains backup power systems for commercial facilities. One IM describes the business: the product range, the installation process, the service contracts, the management team. Accurate. Professional. Forgettable.

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Another IM tells the buyer what problem this business solves for its customers — and what it would mean to own it. Their clients haven’t lost a single production hour to load shedding in three years. The service contract renewal rate is 94%. Every installation is engineered around the client’s specific production risk, not sold off a standard spec sheet. The business doesn’t sell generators. It sells uninterrupted production. The renewal rate delivers exceptional margins, well above industry average.

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Same company. Two completely different documents. The first describes a function. The second tells a buyer what it means to own this business — and why that matters more than what the business does.

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Growth drivers are expected. Growth opportunities are hooks

 

Every IM includes some version of a growth story. Revenue is trending upward, the market is expanding, demand is increasing. That’s fine. Buyers expect it. But what I call growth drivers — the external forces pushing a business forward — are background context. They don’t differentiate you. Every other business in your sector is riding the same wave.

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The real power sits in growth opportunities. And here’s the distinction: growth opportunities are things the business has chosen not to chase — not because they aren’t good opportunities, but because the business hasn’t had the capacity, the contacts, or the funding to pursue them.

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Maybe the business has never pursued cross-border clients across Africa, despite having a product that would travel. Maybe there’s a service line adjacent to the core offering that management hasn’t had the bandwidth to develop. Maybe the business operates in one province when the model could work in three.

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These aren’t weaknesses. They’re strategic hooks for the right acquirer.

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When a buyer reads your IM and hits a growth opportunity that says “untapped client base across sub-Saharan Africa,” one of two things happens. Either they move on — it’s not relevant to them. Or they sit up, because they already sell into that market. They already have the distribution. They already have the relationships. And suddenly your business isn’t just a good acquisition — it’s the acquisition that unlocks something they’ve been trying to build.

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That’s the mechanism that turns a general buyer into a motivated one. They don’t just want a business — they want yours, because it fits a gap they can see and you’ve made visible.

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I try to identify at least four genuine growth opportunities for every business we take to market. Not invented ones. Real opportunities the business has evidence for but hasn’t pursued. When we get those right, the IM stops being a document and starts being a conversation starter with exactly the buyers who should be at the table.

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Fit before numbers

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There’s a temptation — and I see it constantly — to load an IM with financial detail. Full P&L breakdowns. Balance sheets. Ratio analysis. Margin trends going back five years. The logic is understandable: buyers are financial people, so give them what they want.

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But here’s what actually happens. The buyer goes straight to the numbers. They skip the growth story. They skip the strategic fit argument. They form a view based entirely on what the business has done — and either pass or make an offer that doesn’t account for what the business could do in the right hands.

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We include financials in every IM — of course we do. But we’re deliberate about what goes in and what stays out. A clear numbers page that highlights what stands out. The key metrics that tell the financial story. Perhaps a balance sheet summary where it’s relevant to value. But no forensic-level detail that lets a buyer form a complete financial opinion before they’ve understood why this business is worth more than the spreadsheet suggests.

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When the sequence is right — fit first, then numbers — the conversation that follows is about strategic value, not just multiples.

 

The format matters too — and most advisors get it wrong

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Everything I’ve described above is about what goes into the document. But there’s another question that matters just as much: what kind of document should it be in the first place?

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Most sellers don’t know they have a choice. Some advisors send a teaser. Others produce a full prospectus. We use the information memorandum — and the reasons why are worth a conversation of their own. I’ll cover that next time.

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If you’re thinking about an exit and want to understand how we’d position your business in that competitive landscape, I’m always happy to have that conversation over a coffee at our offices in Illovo.

 

Until next time,

Rick Grantham, Deal Leaders International