Investment Memorandum Format

The exact format varies by transaction, but an investment memorandum generally covers the following areas:

1. Executive Summary

A concise overview of the opportunity, transaction, capital requirement, proposed investment or financing, and key considerations. The reader should be able to understand the basic transaction without reviewing the entire memorandum first.

2. Project or Investment Overview

Describes the project, company, asset, acquisition, or other transaction being presented. This section establishes what is being financed or invested in, who is involved, and the current status of the opportunity.

3. Market and Commercial Case

Explains the relevant market, customers or counterparties, commercial model, revenue drivers, and other factors supporting the underlying business case.

4. Financial Case

Presents the financial characteristics of the transaction, including relevant historical or projected financial information, capital requirements, sources and uses, and key financial assumptions.

For a financing transaction, the memorandum should make the relationship between the proposed capital structure and expected cash flows understandable to the intended credit or investment reviewer.

5. Transaction and Financing Structure

Explains how the proposed transaction is structured, including the type and purpose of capital being sought, the parties involved, and the principal commercial terms relevant to the investment or financing.

6. Risks and Mitigants

Identifies the material risks associated with the project or transaction and explains the measures being used to manage or mitigate them. Risks should be presented objectively rather than omitted or minimized.

7. Supporting Information

Provides or references information needed to substantiate the statements, assumptions, projections, and other material claims made in the memorandum.

What Makes an Investment Memorandum Effective?

A useful investment memorandum is clear, internally consistent, and supported by the underlying transaction information. The financial projections, assumptions, transaction structure, and other material statements should be consistent with the supporting documentation.

The purpose of the format is not simply to make the document look professional. It should allow the intended capital provider to understand the transaction, assess the commercial and financial case, identify material risks, and determine what requires further review or due diligence.

The appropriate content will vary by transaction. A project finance memorandum, for example, may require different information from a memorandum prepared for an acquisition, real estate investment, or corporate investment.

Need to Write an Investment Memorandum?

For readers who want a practical framework on how to prepare an investment memorandum that lenders will not ignore, AltFin provides the guide How to Write an Investment Memorandum That Answers Credit Questions.