Investment committee memo

Question

Should the committee approve this position, and if so, on what terms?

Inputs

Input	Source
Target description	Company materials, diligence dossier
Thesis	Sponsor or analyst write-up
Financial model	Three-statement model and valuation work
Diligence findings	Commercial, financial, legal, operational, technical
Returns analysis	Sensitivity grid across the deal's key variables
Risk register	Named risks, mitigants, residual exposure
Comparable transactions	Precedent deals at similar entry multiples
Recommendation	Buy / pass / conditional

The memo is the artifact the committee votes on. Every claim in it must be traceable to a source.

Procedure

1. Open with the recommendation. One line. Buy at this price, on these terms, by this date. Or pass. The committee reads the memo to test the recommendation, not to find it.
2. State the thesis. Three to five sentences. What is the business, why is now the moment, what will the next holder pay more for.
3. Describe the target. What it does, what it earns, who the customers are, who the management is. Two paragraphs.
4. Summarize the financials. Historical and projected. Revenue, profitability, cash conversion. Reference the model, do not duplicate it.
5. Lay out the valuation. Discounted cash flow, comparable companies, comparable transactions. Triangulate to a fair entry price.
6. Show the returns. Internal rate of return and multiple on invested capital across three scenarios — downside, base, upside. The committee approves the downside, not the base.
7. Name the risks. Each risk gets a line. Likelihood, severity, mitigant. Residual risk lives in the closing paragraph of this section, not buried inside.
8. Set the structure. Capital structure, governance terms, exit covenants, board composition. The terms create the returns as much as the operating plan does.
9. State the conditions. What must happen before the deal closes. What must happen during the hold. What constitutes a breach.
10. Close with the recommendation again. Same one-line opener. Restated after the body. Add the date.

Gates

• No one-line recommendation at the top
• Downside scenario delivers a return the committee would not accept
• A risk is named without a mitigant or a residual exposure
• The returns reference scenarios that are not in the model
• The memo cites a number that does not appear in any underlying file
• Conditions to close are not enumerated

Output

A memo (three to ten pages, depending on the firm) that ends in a binary vote. The memo stages for the committee, not for direct execution. Approved memos move to a closing checklist; rejected memos move to a learnings register.

Common Mistakes

• Writing the recommendation last, after the body, so the body biases the conclusion
• Citing operating projections without naming the scenario they came from
• Mitigating every risk to zero on the page (the committee distrusts the memo)
• Treating the structure section as boilerplate (the terms are half the deal)
• Closing without a date — open memos rot

Adjacent Methods

• Discounted cash flow — the absolute valuation anchor
• Comparable company analysis — the relative valuation anchor
• Leveraged buyout model — the returns engine for sponsor deals
• Know-your-customer framework — clearing the counterparty before approval

Questions

Would the committee approve the downside scenario, not just the base?

• Is every risk mitigant honest, or does it reduce residual exposure to zero on paper?
• Does the memo close with a date?