Our team of professionals at Cambridge Corporate Finance helps you navigate raising capital, from creating a business plan to a pitch deck. If you need the perfect business memorandum, you came to the right place.
We can help you successfully create a business memorandum that contains essential company information and metrics that investors want to see.
A Business Memorandum, specifically a private placement memorandum or information memorandum (in the UK), is a legal document that contains information about the securities a company is offering, and important company details. A company should provide a private placement memorandum to prospective investors. Therefore, a private placement memorandum is critical if you plan to sell securities to raise capital for your company.
There are two different types of private placement memorandums – equity and debt. Let’s explore the difference between the two different types.
A company should use a debt memorandum when it sells bonds or notes. In this type of memorandum, the company should outline the interest rate and maturity date of the debt security. Furthermore, the memorandum should mention whether or not the debt security converts to an equity security at a later date.
The second type of memorandum is an equity memorandum – when a company sells a security in exchange for an equity stake in the business. A company usually sells equity in the form of stock. The memorandum should notate whether the stock is common or preferred.
Both equity and debt private placement memorandums should contain the following critical company information:
If you are in the United Kingdom or Asia, you may be familiar with the term “information memorandums.” In essence, an information memorandum has the same goal as a private placement memorandum: to provide important business information to investors. There are slight variations in the verbiage used in an information memorandum.
An information memorandum contains an “investment thesis.” The goal of the investment thesis is to give investors reasons why they should invest in the company. Another notable variation in verbiage is the term “profile.” For example, customer profile, employee profile, and revenue profile. A profile is merely a summary or a description of a particular area of the business. The customer profile would be called the “target market” in a private placement memorandum. While the contents of the memorandums are nearly the same, it is important to note the differences in language.
Another difference between the two memorandum documents is that US securities lawyers write private placement memorandums and business analysts write information memorandums. Moreover, a private placement memorandum contains the detailed legal terms of the security and is paired with a subscription agreement — an agreement entered into by a company and investor to buy shares at a certain price. Information memorandums, on the other hand, contain standalone information only.
Read more about each memorandum, in detail:
An information memorandum contains important details such as projected growth, historical financial data, and an overview of the management team that runs the business.
Also referred to as an offering memorandum, a private placement memorandum is a legal document that investors receive before buying a security.
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