drafting-offering-memoranda

# Drafting Offering Memoranda

## When To Use

- Preparing a Confidential Information Memorandum (CIM) for a sell-side M&A engagement
- Creating an offering memorandum for a private placement, recapitalization, or minority stake sale
- Drafting teaser / blind profile documents that precede full CIM distribution
- Updating or refreshing an existing CIM with new financial periods or revised projections

## Inputs To Gather

- **Company overview materials** — management presentations, corporate website content, prior board decks
- **Historical financials** — 3–5 years of audited P&L, balance sheet, and cash flow statements; monthly or quarterly detail for the trailing twelve months (TTM)
- **Projections / management case** — forward-looking model (typically 3–5 years) with key assumptions documented
- **Quality of earnings (QoE) report** — if available; adjustments to EBITDA (add-backs, normalizations, pro forma items)
- **Customer and revenue data** — top-10 customer concentration, contract terms, recurring vs. non-recurring revenue mix, churn/retention metrics
- **Organizational info** — org chart, key employee bios, headcount by function, facility list
- **Market / industry data** — TAM/SAM sizing, competitive landscape, industry growth rates, relevant benchmarking
- **Deal parameters** — target valuation range (if set), process timeline, buyer universe profile (strategic vs. financial), any seller constraints (e.g., management rollover, asset vs. stock preference)
- **Confidentiality considerations** — items that require redaction in the teaser vs. full CIM; any regulatory sensitivity [VERIFY]

## Workflow

1. **Define scope and format**
   - Confirm whether the deliverable is a full CIM, a teaser, or both
   - Determine page count target and level of financial granularity expected by the banker
   - Identify any sector-specific disclosure norms (e.g., healthcare CIMs often require regulatory/payor mix detail; software CIMs emphasize ARR cohort analysis)

2. **Build the CIM outline**
   - Standard section order:
     1. Disclaimer / confidentiality notice
     2. Executive summary (1–2 pages — investment highlights, key metrics, transaction overview)
     3. Business overview (history, business model, products/services, value proposition)
     4. Market and industry overview (size, growth, trends, competitive positioning)
     5. Growth opportunities (organic initiatives, M&A pipeline, geographic expansion)
     6. Management and employees
     7. Financial overview (historical performance, adjusted EBITDA bridge, key KPIs)
     8. Financial projections and assumptions
     9. Appendices (facility detail, supplemental financials, customer/contract summaries)

3. **Draft the executive summary first**
   - Lead with the 4–6 investment highlights that define the equity story (e.g., market leadership, recurring revenue, margin expansion trajectory, defensible IP)
   - Include a snapshot financial table: Revenue, Gross Profit, Adj. EBITDA, and Adj. EBITDA Margin for LTM and 2–3 projection years
   - State the transaction structure if known (100% sale, majority recapitalization, etc.)

4. **Draft business and market sections**
   - Write in third-person, factual banker tone — assertive but supportable
   - Quantify claims wherever possible ("serves 1,200+ enterprise customers across 14 countries" not "serves a large, global customer base")
   - For competitive positioning, use a matrix or ranking framework rather than vague superlatives
   - Include visual aids: revenue mix pie charts, geographic heat maps, org charts

5. **Draft financial sections**
   - Present an adjusted EBITDA bridge table showing each add-back with a one-line rationale
   - Flag any add-back exceeding 10% of reported EBITDA as requiring supporting documentation [VERIFY]
   - Show historical and projected KPIs: revenue growth %, gross margin %, EBITDA margin %, capex as % of revenue, net working capital trends
   - Ensure projections tie to the management model; note any banker-applied haircuts or alternative cases

6. **Draft the confidentiality notice**
   - Include standard language: document is confidential, intended solely for the recipient, no reproduction or distribution, not an offer to sell securities [VERIFY — language must comply with applicable securities regulations and any state-specific requirements]
   - Reference the executed NDA or CA by implication

7. **Compile and cross-check**
   - Verify all figures in the executive summary match the financial section
   - Confirm company name, entity structure, and deal terminology are consistent throughout
   - Run a "so-what" test on each section: does every paragraph advance the investment thesis or provide decision-useful information?

## Output

- **Full CIM document** structured per the outline above, in clean narrative prose with embedded tables and placeholder chart descriptions
- **Teaser / blind profile** (if requested) — 1–2 page anonymized summary with codename, sector, headline financials, and investment highlights; no identifying information
- **EBITDA adjustment summary table** as a standalone exhibit suitable for inclusion in a data room or management presentation

## Quality Checks

- [ ] All financial figures are internally consistent (executive summary ↔ financial section ↔ appendices)
- [ ] Adjusted EBITDA add-backs are individually described and sourced; total adjustments are reasonable relative to reported EBITDA
- [ ] No customer names, proprietary pricing, or other highly sensitive data appear outside appropriate sections (and teaser is fully anonymized)
- [ ] Investment highlights are specific and quantified — no unsupported superlatives
- [ ] Projections include clearly stated assumptions; hockey-stick growth curves are flagged for banker review
- [ ] Confidentiality notice is present on the cover page and footer [VERIFY — confirm firm-standard disclaimer language]
- [ ] Sector-specific metrics are included where applicable (e.g., ARR/NRR for SaaS, same-store sales for retail, bed count/payor mix for healthcare) [VERIFY]
- [ ] Document tone is professional, third-person, and avoids first-person references to the company