The Importance of Market Research in an Information Memorandum

1. The Importance of Market Research in an Information Memorandum An Information Memorandum, also commonly referred to as a confidential information memorandum (CIM) or offering memorandum (OM), is a document used in the sale of a business. It is a document used to present information about the business that is up for sale. It gives vital information about the operations, management team, financials and includes a great deal of other information as well. One of the other pieces of particularly important information is market research. Purpose The ultimate purpose of the information memorandum is to make the business as attractive as possible to potential buyers. It’s not just about selling the business but ensuring you get the best possible price for the business. There are many elements involved in making a strong case for the business, one of the keys to achieving this is Market Research. Components of Market Research In the information memorandum, market research will likely be concentrated in the section intended to overview the market, though it will be incorporated other places. Within the main section overviewing the market it will cover many components.

2. Overall market size is likely how this section will begin. It is important to demonstrate that there is a general appetite among consumers for the product or service that is offered. It demonstrates not only the size of the market but, also trends occurring within the market that have already or are likely to impact the business. Beyond that, this section covers competition. Regardless the size of the market, a great deal of success will rely on how open the market is and what established or upcoming competitors are doing. You cannot truly present a picture of your company without discussing the competitors that are capturing other parts of the market share. Another part of the overview of the market section may include other aspects of market research which include things like addressing your pricing. There are a number of factors that go into setting prices but, part of the equation is usually what the market will tolerate and what competitors are already charging. All of these aspects are just a sampling of how market research will directly influence the decisions a business makes in the beginning and how it will justify and support those choices when it is time to sell the business. Market Research in the Information Memorandum Market research may not just play a part in the market overview section of the information memorandum. It will likely be referred to either subtly or directly in other sections. It will also be used to back up and solidify the Financial Projections. The future outlook on the company is not just based on the historic performance but, also the state of the market. In some cases, the market is more indicative of the future potential of a company than nearly anything else. If there is no future market to support the business, it will not be successful no matter how great the products or services the company offers may be. All sections in the Information Memorandum are important. Cohesively, much like a business plan, an information memorandum gives a solid and complete overview of a business. Market Research will inform many aspects of the entire document. It is certainly not the only important aspect but, it is a key that needs to be carefully considered, thoroughly researched, and incorporated throughout.