What is the Confidential Offering Memorandum (COM)?

The Confidential Offering Memorandum (COM) is a document used for selling a business. Typically drafted by an M&A intermediary, this document includes all pertinent information that a buyer may need to know when seeking more information about a business that is being offered for sale, and it acts as an introductory package of information for the business for sale.

However, the reason that the seller does not just take on this project himself is because the COM must be crafted in a way that does not divulge important information that would make it possible for anyone to gather which business is being advertised. Confidentiality is vital to the M&A process, since the news of the business being for sale has the potential to harm the business.

The seller and the intermediary will work together on this document, combining a knowledge of the business and experience in the M&A industry. In order for the buyer to view the business at both attractive and as having a high value, the COM must display all pertinent information about the business in a positive light. Of course, all facts must be true. Misleading the buyer can sour a deal as they discover discrepancies during the due diligence process.

The COM will present the company’s key selling points, and will typically include the following: detailed information about the business and management of operations; financial information including both past balance sheets and projections for future growth; and deal specifications such as financing options and deal structure. The seller must also be prepared to answer some more abstract questions, such as the company’s biggest strengths and weaknesses and potential industry opportunities.

Once the document has been completed and the intermediary has reviewed it with the client, then the COM is shared with the M&A firm’s exclusive list of business buyers. A vital part of having an M&A advisor is getting access to their unique buyer list, so that the seller may be matched with a buyer who is a great fit.

During the negotiation process, all subsequent legal documents will in part draw from the text in the COM. Since the intermediary learns a lot about the company in drawing up the COM document, they will have a background on how to negotiate a deal with the most relevant information in order to get the best deal. The M&A intermediary is a vital part of the M&A process.

If you are looking to sell your business, contact George & Company to speak with an M&A intermediary today.