An investment teaser is a one or two-slide summary of a potential sale process without mentioning the name of the potential target company, in order to maintain the company’s identity as confidential. A teaser should include the unique selling points of the company while ensuring that the value of the business is understood by a large audience. A wider search for buyers helps the target company get the best possible deal.
When a company decides to go for a sale process, the first and foremost objective of the company is to get the maximum sale price. In order to achieve this, the company hires investment bankers or M&A advisors. The objective of the bankers is also to 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 the company well to potential buyers. Hence, the bankers prepare a professional document known as a “teaser,” wherein they highlight the 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” is 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 – The company’s capabilities, along with the nature and type of products or services it offers to customers. One should ensure that this information is not copied directly from the company’s website, because then the reader might then be able to identify the company from reading the teaser.
Location – It is important for the teaser to mention the location of the company’s headquarters. This enables potential buyers to think from a synergy perspective or look at a deal as a way to enter a new market.
Financial Summary – This section of the teaser is very important, as many investors are only interested in investing in companies with a certain financial profile, such as small companies with revenues from US $5 million to US$ 50 million, or large companies with revenues in the range of US $100 million to US $500 million. The financial summary also provides forecasts of the target company’s EBITDA margins and other financial metrics.
Investment Rationale – This section describes the USPs of the company and the reason(s) 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.
Customer Overview – Some teasers also highlight a few of the company’s customers, especially if they are major brands in the industry, to build credibility for the company.
Transaction Structure – This section deals with the nature of the transaction as expected by the seller. It may be a complete sale of the business, a carve-out, venture financing, etc.
Bankers Information – The teaser also mentions whether the sale process is taken up by an exclusive banker or is a joint venture by two or more banks. 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., companies who are operating in the same industry, and financial investors such as Private Equity (PE) firms. The objective of sending the teaser is to identify their interest in a potential deal.
As a next step, if potential buyers show interest in the business, they then sign a Non-Disclosure Agreement (NDA) with the target company. The NDA is signed to maintain the confidentiality of the company’s identity and to ensure that 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, along with more information that is contained in the Confidential Information Memorandum (CIM).
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