ECM Memo (Equity Capital Markets)

What is an Equity Capital Markets ECM Deals Committee Memo?

An Equity Capital Markets (ECM) Memo is generated internally at an investment bankInvestment BankingInvestment banking is the division of a bank or financial institution that serves governments, corporations, and institutions by providing underwriting (capital raising) and mergers and acquisitions (M&A) advisory services. Investment banks act as intermediaries to approve a potential transaction (IPO, follow-on offering, etc.).  The ECM Memo is prepared by the investment banking teamInvestment Banking Career PathInvestment banking career guide - plan your IB career path. Learn about investment banking salaries, how to get hired, and what to do after a career in IB. The investment banking division (IBD) helps governments, corporations, and institutions raise capital and complete mergers and acquisitions (M&A). and sent to the ECM team.

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Equity Capital Markets – ECM Memo Example

Date: [insert date of memo]

To: [insert names of members of ECM Deals Committee]

From: [insert names of members of Investment Banking TeamInvestment Banking Career PathInvestment banking career guide - plan your IB career path. Learn about investment banking salaries, how to get hired, and what to do after a career in IB. The investment banking division (IBD) helps governments, corporations, and institutions raise capital and complete mergers and acquisitions (M&A).]

Cc: [insert appropriate names]

Re: ECM Deals Committee Meeting – [insert name of issuer/details of offering] Meeting [insert date, time and location of meeting and conference call details] Details:

Situational Overview:

• Why are we meeting?
• What proposed resolutions do we want achieve?

Proposed Issue:

• Is this a Prospectus Offering or a Private Placement?
• Is this an IPO or a follow-on offering?
• Is it a treasury offering or a secondary offering?
• Size of issue and type of security (Long Form/Short Form eligible)
• Geographic distribution objectives
• Retail and Institutional distribution objectives
• Syndicate structuring objectives

Use of Proceeds:

• Rationale for the issue and how proceeds will be used.

Relationship:

• Issuer’s history with our bank/other dealersList of Top Investment BanksList of the top 100 investment banks in the world sorted alphabetically. Top investment banks on the list are Goldman Sachs, Morgan Stanley, BAML, JP Morgan, Blackstone, Rothschild, Scotiabank, RBC, UBS, Wells Fargo, Deutsche Bank, Citi, Macquarie, HSBC, ICBC, Credit Suisse, Bank of America Merril Lynch

Business of the Company:

• Brief description of issuer’s business

Recent Developments:

• Brief summary of any recent material developments affecting the issuer and its industry

Major Owners:

• [owner] holds[•]%
• Institutional holdings list from Bloomberg

Pro Forma Dilution:

• [number of shares in issue divided by the total outstanding after issue]

Trading:

• Listed on [ exchanges]
• LTM volume of [number] of shares
• Liquidity measure [LTM trading volume divided by number of shares in issue]
• Recent blocks: [major blocks in recent months]
• [date] [number] @ [price] [dealer]

Relationships with our bank:

• Trading summary for 3 months and 1 year
• Is our bank a lender to the issuer? Is the credit agreement in good standing?
• Is our bank a shareholder of the issue? What was the price and timing of the last investment?

Research Coverage Research Comments:

• Firms providing Research coverage
• Our bank’s research recommendation and target price
• Our bank’s earnings estimates
• Other analysts’ recommendations and target prices
• IBES earnings estimates

Historical Financial Information:

• Five-year financial highlights (if not included in other attached documents)

Leverage:

• Amount of long-term debt

Dividends:

• Dividend amount
• Frequency of payments (annual/semi-annual/quarterly)
• Next ex-dividend date
• Any recent changes in dividends or expected changes

Valuation:

• Primary and secondary valuation criteria
• Pricing relative to comparables
• Issuer’s market cap and enterprise value

Share Price:

• Recent share price: [price] [52-week high] [52-week low]
• One-year daily and five-year weekly share price graph from Bloomberg

Most Recent Issue:

• Date
• Type of security
• Price
• The number of securities issued
• Size
• Commission
• Underwriters
• Discussion of actual market receptivity/success of offering

Risks and Risk Factors:

• Industry
• Operational
• Financial
• Environmental/Litigation
• Technology
• Market Receptivity/depth
• Valuation benchmarks/comparables

Knowing how to build an ECM Memo is an important investment banking skill-set.

Additional resources

Thanks for reading about CFI’s Equity Capital Markets ECM memo template.  To learn more, check out the following resources:

• What investment bankers doWhat Do Investment Bankers Do?What do Investment Bankers do? Investment bankers can work 100 hours a week performing research, financial modeling & building presentations. Although it features some of the most coveted and financially rewarding positions in the banking industry, investment banking is also one of the most challenging and difficult career paths, Guide to IB
• Financial modeling guideFree Financial Modeling GuideThis financial modeling guide covers Excel tips and best practices on assumptions, drivers, forecasting, linking the three statements, DCF analysis, more
• Valuation methodsValuation MethodsWhen valuing a company as a going concern there are three main valuation methods used: DCF analysis, comparable companies, and precedent transactions
• All CFI transaction document templatesTemplatesFree business templates to use in your personal or professional life. Templates include Excel, Word, and PowerPoint. These can be used for transactions,