Investment committee memo example: from the IOI to a final bid

You are the associate on the buy side. Your indication of interest for Project Voltaic got you into Phase II of Kingsmill & Co.’s sale of Ironvale Digital Infrastructure, a US data center developer and operator with 220 MW of commissioned capacity in six markets. Since the CIM review, the team has retested the seller’s numbers in financial due diligence. Final bids are due, and nothing goes to Kingsmill until the investment committee approves the price.

Your job now is the investment committee memo: one document that tells the committee what it is buying, at what price, how it is paid for, what it earns and what still has to be true before signing. This page builds that memo one section at a time, each step run in Compound. The answer at the end is a recommended final bid that the committee can approve with nine open items attached.

An investment memo, or investment committee (IC) memo, is the deal team’s written case for a transaction, and the IC decides on it. In private equity it carries the recommendation and terms, a company overview, the investment thesis, the diligence findings, valuation, financing, returns, risks and the open items. A one-page IC summary slide puts the same decision in front of the committee at the meeting. Credit committees read a credit memo with the same discipline, built around leverage, covenants and the downside case.

Ironvale Digital Infrastructure and Project Voltaic are fictional: the company and its data room are the open data room of PE Bench, published under CC-BY-4.0. Everything Compound produced on this page is real: the IC memo, the summary slide and the returns workbook come from one Compound run on that room, quoted unedited apart from excerpts.

What goes in an investment committee memo

The first step sets the memo’s sections in the order a committee reads them, so the decision comes first and the support follows.

Compound’s memo runs to seven sections. Each one answers a question the committee will ask.

Every figure in the memo carries its data room document number and page. Figures from the executed hyperscale leases, which sit in the clean team room, appear only in aggregate, with the three tenants named Tenant A, B and C.

Takeaway: a committee reads the recommendation first and the support after it, so the memo starts with the earnings base the price is built on.

The earnings base: $206.9M of buyer EBITDA, not $224.0M

The second step carries the diligence result into the memo as one bridge from the seller’s adjusted EBITDA to the buyer’s.

These are the buy-side figures from the financial due diligence example, so the memo, the diligence workbook and the lenders all start from the same $206.9M. The add-back tests are worked one by one on the adjusted EBITDA page. The memo keeps the $5.8M of development and management fees in EBITDA because they come under contracts, and it removes interest on cash because a cash-free, debt-free deal takes the cash away.

Takeaway: the memo prices $206.9M of FY25 EBITDA, $17.1M below the seller’s figure, so the next question is what that base is worth at the closing date.

The final bid: the IOI carried to the closing date

The third step sets the price, and the memo states it with the bridge from the IOI and the multiples it implies.

The IOI valued PHX II and ATL II, the two buildings under construction, at cost spent to March 31, 2026. By the December 31, 2026 close, the seller plans to spend another $366M on them, and the bid credits that spend dollar for dollar.

The bid is $4,591M, 22.2x buyer FY25 EBITDA and 18.2x the FY26 budget restated on buy-side definitions. The 19.2x reference multiple is a floor for the buildings, not a price for the company: it divides the six campus appraisals by EBITDA before other income, so it gives nothing for the platform or the development pipeline. Add the $874M that PHX II and ATL II will have cost by the close, and the assets are worth about $4,969M. The bid sits 7.6% below that, before any value for the roughly 400 MW land bank.

The memo also tests the bid against a round 18.0x of FY26 budget EBITDA. On the seller’s definitions that would cost $4,896M, $305M more, and cut the base-case return to 7.9%. On buy-side definitions it is $4,546M, close to the bid. Paying 18.0x the seller’s budget would mean paying for other income and power cost that diligence took out.

Compound put the decision on one slide for the committee meeting.

Takeaway: the recommended final bid is $4,591M at the December 31, 2026 close, the IOI’s value moved to the closing date, and the next step is how it is paid for.

Sources and uses on $1,584.0M of net debt

The fourth step funds the bid on the buyer’s net debt and a staple loan re-sized to the buyer’s EBITDA.

The staple was sized at 6.0x the seller’s $224.0M, $1,344M. Compound re-sizes it to 6.0x the buyer’s $206.9M, $1,241.4M, which is 5.7x LTM March 2026 EBITDA. The $250M delayed-draw term loan funds the $131.6M the buyer still has to spend on PHX II and ATL II after closing, and the $150M revolver stays undrawn. Net debt follows the diligence: $1,584.0M on the buy-side definition, $77.1M more than the seller’s $1,506.9M, and every dollar of it comes off the equity paid to the sellers.

Takeaway: the buyer’s net debt and a $1,241.4M term loan leave sponsor equity at 73.5% of capitalization, so the returns rest on the equity cheque.

Returns: what the base case earns over five years

The fifth step runs the base case to a 2031 exit and shows where the return comes from.

The base case grows the operating campuses at 2.5% a year, ramps PHX II and ATL II to $99.0M of EBITDA by FY30, a 9.8% yield on cost, and sweeps excess cash to the term loan. It exits at 17.7x, the low-case buyer multiple from the IOI, with no value for the long-range plan.

The base case makes 9.7% gross IRR and 1.59x. EBITDA growth, most of it from the buildings under construction, adds $2,270.5M of equity value at the exit multiple, and paying down debt adds $853.2M. Exiting at 17.7x, below the multiple the bid pays on FY25 EBITDA, costs $928.9M. That is a modest return for a private equity fund, and the memo says so. It argues for the deal on the asset value under the price and the upside it does not pay for: lease amendments, documented power recovery and a higher exit multiple. The private equity returns and LBO model pages take the same mechanics further.

Takeaway: the base case earns 9.7% and 1.59x, with multiple compression its largest drag, so the committee will want to see how far price and exit multiple move it.

IRR sensitivity: entry price against exit multiple

The sixth step tests the return against the two numbers the committee argues about most, what we pay and what we sell for.

Each $100M of price moves the IRR by about 0.7 points, and each turn of exit multiple by about 1.3 points. Two turns of exit multiple are worth about as much to the return as $400M of price. The sensitivity analysis page shows how to set up a grid like this as a live Excel data table.

Takeaway: at the recommended bid the IRR runs from 7.0% at a 15.7x exit to 12.3% at 19.7x, so the memo’s last word is what could push it down and what must be settled first.

Risks and open items before signing

The last step turns what diligence left open into the conditions of the committee’s approval.

The double count is the finding nobody would make from one workbook. The $17.6M deducted from value for PHX II and the $1,584.0M of debt-like items were built in different steps, and both include the lien claim and the overdrawn contingency. The memo’s risk table rates the hyperscale roll by FY28 high and concentration, development execution, financing and rates medium, each with its mitigant.

Takeaway: the committee can approve the bid on nine conditions, and the lease amendments and the staple re-sizing are the two that decide whether it stands.

FAQ