What is an Investment Committee (IC) memo?

Q: How does AI ensure the data in the memo is correct?

F2 uses tools such as 'Audit Mode' to link every number in the memo back to the original source file (e.g., an Excel model or a PDF), enabling instant verification.

An Investment Committee (IC) Memo is a formal document presented by a deal team to the firm's partners or credit committee. It synthesizes the due diligence findings, financial analysis, and risk assessment to recommend the approval or rejection of a transaction.

It is also referred to as a "credit memo," "deal memo," or "IC paper."

What an IC memo includes

Standard sections typically include:

Executive summary: The investment thesis, key strengths, and final recommendation.
Business overview: A description of the borrower’s operations, market position, and management team.
Financial analysis: Historical performance summaries, spreads, margins, and projected cash flows.
Risk and mitigants: A detailed list of key downside risks and how the deal structure or collateral protects the lender.
Covenant package: The proposed financial covenants (e.g., Max Leverage, Min Liquidity) and their rationale.

How to automate the IC memo

Modern platforms automate the drafting of IC memos to save analysts time from having to start with a blank canvas:

Template ingestion: The AI ingests the firm's past memos to learn the specific formatting, tone, and section structure.
Data population: Financial tables and charts are automatically populated directly from the spread.
Dynamic drafting: Analysts use natural language prompts (e.g., "Summarize revenue trends") to generate narrative sections.
Audit linking: Every data point in the memo is hyperlinked to the source document for verification during the committee review.

Where IC memos are used

Private equity: To approve platform acquisitions or add-ons.
Private credit: To sanction new loans or material amendments.
Commercial banking: For formal credit approval on loans exceeding a certain size.

Benefits of an AI-powered IC memo

Clarity: A consistent format helps committee members quickly find the information they need to make a decision.
Accuracy: Automating the data transfer from Excel prevents manual copy-paste errors.
Efficiency: Frees analysts to focus on the argument and judgment rather than the formatting and assembly of the document.

Limitations of an IC memo

Human judgment: While AI can draft the memo, the final recommendation and the weighing of risks require human conviction and defense.
Static nature: Traditionally, memos are static documents; if the underlying model changes, the memo must be manually updated. AI solves this by dynamically linking a memo's output to the underlying financial assumptions. When a financial calculation is updated, the memo is updated as well.

IC memo FAQs

What is the difference between a screening memo and an IC memo?

A screening memo is a short, preliminary document used to decide if a deal is worth pursuing. An IC memo is a comprehensive, long-form document used to make the final investment decision.

Can AI write an entire investment committee memo?

AI can generate an initial draft that includes financial summaries, business descriptions, and risk factors. However, the deal team must review, refine, and add their strategic judgment to the final output.

How does AI ensure the data in the memo is correct?

F2 uses tools such as "Audit Mode" to link every number in the memo back to the original source file (e.g., an Excel model or a PDF), enabling instant verification.