What Should an Information Memorandum Tell You When Buying an Accounting Practice?
Updated: Sep 30
An Information Memorandum (IM) should help you understand the opportunity quickly, but it should not be treated as proof that every figure or statement has been independently verified.
When an accounting practice is marketed for sale, the business broker or vendor may provide an Information Memorandum, business profile or similar sales document. It can be extremely useful because it brings the headline facts into one place.
An accounting practice information memorandum should explain the opportunity clearly enough to guide the buyer's next information requests without being treated as verified due diligence.
Stage 2 is about using that document as a starting point, then identifying what needs to be supported by underlying records as the acquisition progresses.
Accounting practice Information Memorandum: the short answer
It should explain what is being sold, the asking price and the proposed transaction at a headline level.
It should summarise the practice's services, revenue, earnings, clients, staff, premises and vendor involvement.
Key financial measures should state the period they relate to and, where adjustments are shown, the basis for those adjustments.
It should help the buyer identify what to request next — not replace financial, legal or operational due diligence.
What is the Information Memorandum for?
Its main purpose is to describe the opportunity clearly enough for a prospective buyer to decide whether further investigation is worthwhile. It normally sits between the initial teaser and the more detailed information request.
Because it is commonly prepared as part of a sale process, the buyer should distinguish between descriptive information, vendor assumptions and facts that have been tested against underlying evidence.
It should clearly describe what is being sold
The document should explain whether the transaction involves an entire practice, a fee book, particular assets or another defined parcel. The buyer should also be able to identify the proposed asking price and any headline payment or settlement assumptions.
If the commercial perimeter is unclear, the financial information is harder to interpret because the buyer does not yet know what those figures are meant to support.
The practice profile should be more than marketing copy
Useful background can include the history of the practice, office location, services, systems, client profile, staff structure, reason for sale and how the vendor currently works in the business.
This does not need to become a technical due-diligence report. It should give the buyer enough context to understand how the practice actually operates.
Revenue and earnings need context
Headline revenue, EBITDA or profit figures are only useful if the buyer knows the period covered and whether any adjustments have been made. If the memorandum presents normalised earnings, add-backs or pro forma figures, ask what sits behind them.
The client summary should show the shape of the revenue
An Information Memorandum can summarise client numbers, recurring revenue, concentration, service mix and industries without disclosing every client's identity at the outset.
If the document says the fee base is diversified or highly recurring, later information should make it possible to test those statements.
The people section should explain how the practice runs
The staff summary should identify the approximate team structure, senior roles and whether key people are expected to remain. The vendor's working role should also be described, particularly where they carry important client, technical or management responsibilities.
A reported profit figure can be difficult to interpret without knowing who actually performs the work that produces it.
What should not be assumed from an Information Memorandum?
That the financial information has been independently verified.
That every adjustment to earnings will be accepted by the buyer, adviser or lender.
That historical client revenue will automatically transfer after settlement.
That statements about staff, legal matters or transaction structure replace specialist advice.
Frequently asked questions
Is an Information Memorandum the same as due diligence?
No. It is an overview prepared to explain the sale opportunity. Due diligence tests important statements and risks using underlying records and other evidence.
What if there is no formal Information Memorandum?
That is not automatically a problem. A smaller sale may use a broker summary or direct information pack. The key issue is whether the buyer receives the information needed to understand the opportunity.
Should I rely on the EBITDA shown in the memorandum?
Treat it as a figure to understand and reconcile, not as automatically verified sustainable earnings. Ask how it was calculated and what adjustments were made.
Illustrative decision scenario
A memorandum states that a practice generates $1.4 million of revenue and $420,000 of normalised earnings. It also notes that the vendor works full-time and that two managers run substantial client portfolios.
The document has done its Stage 2 job if it helps the buyer identify the next evidence to request: financial statements, current YTD accounts, the earnings-adjustment schedule, client revenue analysis and staff information. This example is illustrative only.
A practical Information Memorandum review
Read the memorandum with two columns beside you: “what this tells me” and “what evidence would support it”. Mark each major statement about revenue, profit, clients, staff, owner involvement and transaction terms.
That turns a marketing document into an information map for the next stage of investigation.
Which adviser covers which issue?
An accountant or transaction adviser can help interpret financial and operating information. A lawyer advises on legal documents, liabilities and transaction terms. A finance broker can explain which information may become relevant to a later funding assessment.
The buyer remains responsible for deciding whether the memorandum provides enough substance to continue investigating.
What should you look at next?
Stage 2 works best when each information category builds on the last rather than being reviewed in isolation.
Conclusion
The purpose of Stage 2 is not to finish due diligence. It is to obtain enough structured information to understand the practice more intelligently, identify gaps and decide what should happen next.
Return to Stage 2 — Initial Information for the full information-gathering sequence.
Considering an Accounting Practice Acquisition?
Discuss how the information available, proposed acquisition and funding pathway could be assessed as the transaction progresses.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
