It is usually accompanies by a one-page teaser, a non-confidential document that can be shared with multiple investors. If a company yielding an investment memorandum provides false information that leads to an investment, for example, the investor has strong grounds for litigation.įor these reasons, the investment memorandum plays a key role in the investment process. Protectionīy holding a document that the company itself has provided, the investor is given a degree of legal protection against disinformation. Investors will often use financial ratios to make these comparisons across companies. This enables them to compare companies with their peers to enable them to make better investment decisions. Most investors receive dozens or hundreds of investment memorandums every week. A good memorandum will inform them about things they didn’t know before, potentially with the idea that they’re willing to invest on the basis of the new information. The core idea of an investment memorandum is to provide investors with information. This benefits investors in several ways: 1. This doesn’t mean that the investment memorandum is an advertisement for the company rather, it should seek to inform investors in an objective and detailed manner about the company. This means that the document is essentially a business plan aimed at investors. The investment memorandum is used to communicate to investors that the company is seeking an investment, and where the investors funds will be used, and how they will be repaid. One such example is the balance sheet, which is only given some importance in small public companies, but represents an important component of a mid-sized or large public company’s investor attractiveness. In essence, both markets are extremely similar, although there tend to be stricter criteria around disclosures for prospectuses than memorandums. While the investment memorandum is used for private markets, an investor prospectus - or simply, ‘prospectus’ - is used for public markets. This is the investor prospectus: The Investor Prospectus However, this being said, there is a second document, for which a distinction from investment memorandums is required.

All are simply synonyms for the same document. These names give the impression of different documents, but in truth, there is no difference between a Private Placement Memorandum (PPM), Offering Memorandum (OM), or an Information Memorandum (IM). There is some confusion around the different types of investment memorandum used by business, owing to the different names given to the document. Importantly, if hired by the company to do so, they can also share the information with the network of investors. These investment bankers or intermediaries will have more experience in how the information within should be structured and communicated. An investment memorandum can be written in-house by a company’s management, but more often than not, an external team of investment bankers or intermediaries will be hired to draft the document.

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