The Information Memorandum moves your final sale price more than any other document, and most are prepared badly. Here's the step-by-step guide that works.
There's a widespread belief among entrepreneurs about to sell their business: that what matters most is the financial model, the projections, the multiples. The reality is that the document that moves the final sale price the most is none of those. It's the Information Memorandum (IM) — the sales document buyers receive once they sign the NDA. It's the first impression, the only structured thesis about your company, and in 90% of deals it determines whether a buyer makes an offer or walks.
The problem is that almost nobody prepares it well. I've reviewed more than a hundred and most are a mix of badly explained balance sheets, office photos and triumphalist projections without backing. This guide is the step-by-step process that actually works, in order of importance.
Step 1: Define the narrative angle before touching Excel
The number one mistake is opening Excel and starting to plug in numbers. The Information Memorandum is not an accounting report — it's an investment thesis. Your job, before writing a single line, is to answer one specific question: why should a rational buyer pay 6x EBITDA for my company instead of 4x?
The answer is not "because it's very profitable." It's something far more specific. A SaaS sells recurring revenue with low churn. An industrial firm sells barriers to entry (certifications, accumulated capex, long-term contracts). A clinic sells a regulatory moat. A distributor sells geographic coverage that's hard to replicate. Define that angle in one sentence under 20 words before you touch anything else. Everything else in the document must reinforce it.
Step 2: Build the executive summary on a single page
The first page of the IM decides whether the buyer keeps reading or drops it at the bottom of the pile. It must fit on one A4 page and contain exactly five blocks:
- Company description: two lines. "Distributor of chemical products for the food industry, 38 years of operation in northern Spain, 450 active customers."
- Key metrics for the last fiscal year: revenue, EBITDA, EBITDA margin, 3-year CAGR, headcount.
- Value proposition: three bullets, no more. What differentiates this business from the competition.
- Transaction summary: percentage on offer (100%, majority, minority), target buyer profile (strategic, financial, both), estimated timeline.
- Adviser contact: name, email, phone. Without this, the buyer doesn't know how to proceed and gives up.
Nothing else. No mission, no vision, no values. You're selling a business, not applying for a corporate role.
Step 3: Work the financial block with normalized adjustments
This is where most owners lose money out of ignorance. Your statutory P&L doesn't reflect the real profitability of the business. The normalized P&L does, and building it well can lift your valuation by 15-25% without touching the business.
The legitimate adjustments to include, line by line:
- Above-market shareholder salaries: if you and your brother each earn €180,000 and a sector GM costs €90,000, that's €180,000 of EBITDA add-back.
- Non-recurring expenses: the warehouse flood of 2024, the commercial director severance, the extraordinary legal audit. If it won't repeat, it shouldn't depress recurring EBITDA.
- Owner expenses disguised as operating costs: personal cars, family trips, lunches. If they're on the books, out of normalized EBITDA.
- Related-party rent: if your company pays €8,000/month for a warehouse you personally own and market rent is €5,000, adjust to market.
Document each adjustment with an invoice or calculation. If you don't document it, the buyer won't believe it and will discount it from the offer anyway.
Step 4: Document the invisible assets (they're not on the balance sheet but they're what gets bought)
This is the part 80% of IMs skip — and yet it justifies half of the price. A serious buyer doesn't pay for your fixed assets. They pay for assets that appear nowhere on the balance sheet:
Customer portfolio with concentration analysis. List the top 20, with revenue, margin and tenure. If your top 10 represents 75% of revenue, be honest — buyers will find out in due diligence and lying costs you all credibility. Better to explain why concentration isn't fragility: long contracts, high switching costs, mutual dependency.
Recurring contracts with average duration. If you have 230 customers on 3-year contracts, that's backlog and it's worth a lot. Calculate ARR and show it separated from non-recurring revenue.
Key team and retention plan. Who are the 5 people whose departure would sink the business? Include them with role, tenure, dependency level. If you have lock-in agreements, say so. If you don't, the buyer will demand aggressive earn-outs.
IP and registrations. Trademarks, patents, ISO or sector certifications, proprietary software, databases. Full list with expiry dates.
Strategic supplier relationships. Exclusivity agreements, volume discounts, favorable payment terms. Each is a hard-to-replicate competitive advantage.
Step 5: Frame the investment case with numbers, not adjectives
The final block of the IM is where most owners get sentimental and lose all credibility. "Great growth potential", "wide market opportunities", "promising future". Adjectives. Zero information.
What the buyer needs is the opposite: quantification of the opportunity they could capture but you couldn't. Three formats that work:
- Geographic expansion: "We operate in 7 northern provinces. Catalonia and Levante represent an addressable market of €18M with similar competitive dynamics. A staged 24-month rollout could add €2.8M of revenue at 19% EBITDA margin."
- Cross-selling: "Our 450 customers consume on average 2.3 SKUs out of 18 in our catalog. Lifting that to 3.5 (sector median) would yield an additional €1.1M with no acquisition cost."
- Industrial synergies: if you're targeting a strategic buyer, identify what savings they'd capture from integrating your business with theirs — joint procurement, duplicate elimination, cross-selling.
Every opportunity should come with a number, a timeline and an associated cost. A rational buyer doesn't pay for "potential". They pay for a credible roadmap that justifies an above-sector multiple.
Mistakes you'll see in 80% of Information Memoranda
As a closing, the most expensive mistakes owners make when preparing the document on their own:
100+ page documents nobody reads. The optimal IM is 35-50 pages. If you need more, you haven't filtered what matters. Annexes go separately.
Defensive tone about weaknesses. If your business has one customer at 40% of revenue, don't hide it. Explain it, contextualize it, show what you're doing to mitigate. The buyer will find it anyway. Hiding it just proves dishonesty and kills trust.
Linear projections without sensitivities. If you project 15% annual growth for five years without alternate scenarios, no buyer will believe you. Show base, upside and downside. Justify assumptions.
Office photos instead of products or processes. If your value is in machines, photograph the machines. If it's in products, the products. If it's in services, real customer case studies. Photos of empty hallways add nothing.
No clear calendar. The buyer needs to know when the non-binding phase closes, when the data room opens, when the SPA gets signed. Without a calendar, they assume the deal will drag and discount the price.
A good IM takes 6-10 weeks to prepare with an adviser who knows your sector. If you're asking €8 million for your business, don't skimp on the document that decides whether you get it.
