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 bank to approve a potential transaction (IPO, follow-on offering, etc.).  The ECM Memo is prepared by the investment banking team 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 Team]

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 dealers

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 do
• Financial modeling guide
• Valuation methods
• All CFI transaction document templates