casemark/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