Teaser

A one or two-slide summary of a potential sale process

What is an Investment Teaser?

An investment teaser is a one or two-slide summary of a potential sale process without mentioning the name of the company to maintain confidentiality. A teaser should include the unique selling points of the company while ensuring that the value of the business is understood by a larger set of audience. A wider search for buyers helps as one may never know what a buyer may be interested in and if they are willing to pay a large premium.

 

investment teaser example

 

When a company decides to go for a sale process, the first and foremost objective of the company is to get maximum price in the sale process. In order to achieve this, the company hires investment bankers or M&A advisors. The objective of the bankers is to also get the maximum value as their commission is dependent on the valuation of the business.

In order to achieve maximum valuation, it becomes imperative for the bankers to market it well to potential buyers. Hence, the bankers prepare a professional document known as “teaser,” wherein they highlight company’s business, financials, projected growth, customers, etc. to attract potential buyers. At this point in time, the company doesn’t want to disclose its identity and prefers to remain confidential. Hence, the “teaser” prepared is without disclosing the company’s name.

 

Contents of a Teaser

Below are important sections that should be included in every Teaser:

  • Industry Overview – A brief about the industry and the competitive landscape where the company operates
  • Business Description – It contains the company’s capabilities, the nature and type of products or services it offers to customers. One should ensure that it is simply not copied directly from the company’s website, otherwise, the identity of the company will be revealed just from free internet searches.
  • Location – It is also important for sellers to mention the location of the company’s headquarters. This may allow potential buyers to think from a synergy perspective or look at a deal as a way to enter a new market.
  • Financial Summary – This is very important as every investor invests in a company with a certain financial history. Some investors prefer to invest in small companies with revenues from US$5 million to US$50 million, while others may like to invest in big companies with revenues in the range of US$100 million to US$500 million. The financial summary also provides forecasts of the company’s EBITDA margins.
  • Investment Rationale – It describes the USPs of the company and the reason why investors should consider buying the business. Examples of investment rationale include recurring revenue, enterprise customers, concentrated customer base, latest technology, proprietary platforms, patents, etc.
  • Customers Overview – Few teasers also highlight a few customer names especially if they are major brands in the industry to build credibility for the company.
  • Transaction Structure – It deals with the nature of the transaction expected by the sellers. It may be a complete sale of the business, carve-out, venture financing, etc.
  • Bankers Information – The teaser also mentions whether the sale process is taken up by an exclusive banker or if it is a joint exercise by two bankers. The contact details of the bankers are also mentioned, so that a potential buyer may easily get in touch with them for any kind of information or clarification they may seek.

 

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Next Steps in the Process

Teasers are sent to potential buyers such as strategic investors, i.e. the companies who are operating in the same industry, and financial investors like Private Equity (PE) firms. The objective of sending the same is to identify their interest in a potential deal.

As a next step, if potential buyers show interest in the business, they would sign a Non-Disclosure Agreement (NDA) with the company. The NDA is signed to maintain the confidentiality of the company’s identity and to ensure that the information shared by the seller is not used by the potential acquirer for its personal or competitive gain. Once the NDA is signed, the seller discloses its identity with more information contained in Confidential Information Memorandum (CIM).

 

Related Reading

Thank you for reading CFI’s guide to investment teasers.  CFI is the official global provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification, designed to transform anyone into a world-class financial analyst.

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