How to write the market section of an investment memo

What is the market section of an investment memo for?

When a partner asks what the market size is, the question underneath is sharper: is the market the target sells into large enough, and growing fast enough, to carry the revenue plan, and how sure is the deal team? An investment memo market section that answers anything else, however well, is answering the wrong question.

It is also the section the partners push back on hardest, for a mechanical reason: the market figure is the denominator of every share claim in the memo. Choose a wide enough definition and any plan looks modest; choose the right one and the plan's real ambition shows.

Most market sections fail in one of three ways. They lift the headline from the seller's confidential information memorandum (CIM) or a research publisher's press release, without its definition. They present one number where the public record holds several, so the first question in the room, whose number is that, has no good answer. Or they size the market carefully and never connect it to the model, so nobody can see what share the plan assumes.

Each failure costs the same thing. Once one figure turns out to count the wrong thing, say Euromonitor's $6.9bn of pumps, compressors, taps and valves quoted for a valve maker, the committee stops trusting the revenue line and reads the rest of the memo as advocacy.

Market analysis for an investment committee is therefore narrower than an industry study. How the industry works belongs in an appendix; the market section carries the few numbers the return depends on, which for a Saudi valve maker are a $0.95bn to $1.10bn base and a growth rate near 6%.

What goes in the market section, and in what order?

A complete investment memo market section has seven elements, and each answers the question the one before it raises.

1. 01Lead with the conclusion as the heading: size, growth and what they mean for the plan, in one sentence. 'A roughly $1bn market growing near 6% a year, where the margin sits in control valves and service' does work that 'Market overview' cannot.
2. 02Define the market the target sells into: product, customer, geography, channel, year and value basis, whether manufacturer sell-in, end-user price or production value. Most later arguments are settled here.
3. 03Show the size as a band: every credible estimate side by side, with publisher, publication date and what each one counts, and one sentence on why they differ.
4. 04Choose the base case and say why: the estimate whose definition matches the target's revenue line, not the largest or the most quoted.
5. 05Give growth with its basis: the CAGR, its period, value or volume, and the dated evidence behind it, such as contract awards and regulation, as bear, base and bull rates.
6. 06Bridge to the model: the plan's revenue as a share of the base-case market at entry and at exit, and as a share of the market's growth over the hold.
7. 07Close with structure and the break condition: who else captures the growth, how concentrated the market is, and the one development that would change the view.

The heading carries the finding because several people at the table will read nothing else in the section, and a sentence with a number and a consequence is an argument the room can test.

Elements two and three are where the defense lives. Rarely read aloud, they exist for the moment someone asks where a figure came from, and the answer should take one line: IMARC Group, November 2025, $725.0m for gate, globe, butterfly, ball, check and plug valves.

Which market size should the memo carry?

The one measured the same way as the target's revenue. Published estimates for one market routinely differ by multiples, and most of the gap is definitional: the publishers are counting different things. The memo's job is to say which thing the target sells and carry that figure, with the others shown beside it.

In AI clinical documentation, Caspr's analysis found the publishers agree that demand is rising; $0.98bn and $4.3bn part company because one counts AI note generation and the other the whole clinical documentation improvement category. Only the narrow figure suits benchmarking a pure-play ambient documentation vendor. The broad one describes where such vendors might expand, into coding and chart review, not what they sell today. A memo that sizes an ambient-scribe target against $4.3bn understates the share its plan requires by more than four times.

Check the value basis as well as the scope. Ken Research values Saudi industrial valves at the point of sale to end users, manufacturer and distributor revenue combined; a manufacturer selling through distributors never books that margin, so its share belongs against sell-in value. Euromonitor's page for the wider Saudi equipment grouping shows how far the basis moves a number: $1.4bn of local production against $6.9bn of demand in 2025, both true.

Two rules follow. Never split the difference between estimates that count different things; the result describes nothing anyone sold. When two estimates count the same thing and still disagree, call it a genuine disagreement and state which one the base case relies on, and why. Where the sources are many and contradictory, the full method to reconcile market size estimates that don't match applies; the memo needs only its conclusion and one line per source.

TAM, SAM and SOM are labels for the same choice. In UK facilities management, the $83.29bn total is the figure a seller would call the TAM, while a buy-and-build only acquires revenue in the outsourced segment of over £35bn; the committee wants to know which of the two the revenue plan is divided by.

Where no published figure fits, build one and say so. IC memo market sizing done bottom-up multiplies a count of buyers by what each spends. For US markets, the Census Bureau's County Business Patterns counts establishments, employment and payroll by industry and county, with 2023 the latest data year, and listed competitors' segment revenue gives a floor. Two independent routes that land close together carry more weight in the room than one precise-looking number.

How does the market section connect to the return?

Through share. The plan's revenue divided by the base-case market gives the share the target holds at entry and the share it must hold at exit. The plan's revenue growth divided by the market's growth over the hold gives the share of new demand it must win. Those two ratios are the market section's contribution to the return case, and they belong on the page, not buried in the model.

On the Saudi valves base case, a market near $1.0bn in 2026 growing 6.0% a year reaches about $1.42bn by 2032, so annual market revenue rises by roughly $0.42bn in six years. Any target's plan can be written as a share of that increment, and the memo should write it. This means the committee debates one explicit assumption, share, instead of an implicit one inside the revenue build.

Separate the market's growth from the target's. A plan that outgrows its market is a share-gain plan, and share gains need a mechanism the memo can name: a product the market lacks, a new geography, a competitor leaving, or a rule such as Aramco's 75% local-content target for 2030, which favors valve makers that manufacture in the Kingdom. Separate price from volume too, and let the CAGR's stated basis say which one the growth is.

Growth and margin rarely sit in the same place. The Saudi valves analysis finds topline growth in the mid single digits, while profit pools in control valves, actuators, diagnostics and certified service grow faster as value shifts from hardware to lifecycle performance. For a buyer underwriting EBITDA rather than revenue, that sentence matters more than the market size.

Then name who captures the growth. Since February 4, 2026, Epic's AI Charting has written the visit note inside the record system hospitals already use, so Mordor Intelligence's 21.46% a year for 2026 to 2031 promises an independent scribe company less. The detail of who wins share belongs in the competitive landscape; the market section must name the threat and say what it does to the share assumption.

What will the investment committee challenge?

Seven questions, usually in this order, and the first is nearly always whose number it is. A market section that answers all seven on the page moves the meeting off sources and onto the share assumption, where the debate belongs.

The second question needs the most preparation. The CIM is the seller's document, and nothing obliges it to use the definition that matches the target's revenue. Restate the market on the memo's own definition and reconcile to the seller's figure in one line; adopting it unexamined and ignoring it both fail in the room.

Write the conditions, not hedges. 'Under the bear case, about 5.0% a year, the 2032 market is roughly $1.34bn' gives the committee something to test. 'The market may grow more slowly' gives it nothing.

Handling the challenge live is its own discipline, and the way to defend a market size estimate under questioning starts from this table. With the Saudi base case of 5.8% to 6.2% already printed beside the dated IMARC Group, MarkNtel Advisors and Ken Research estimates, each challenge takes one line to answer.

The figures, side by side

Where the numbers differ, and why

• definitionalIMARC Group $725.0m and Ken Research's broader figure, Saudi industrial valvesKen Research values the market at the point of sale to end users, distributor revenue included: the broad perimeter of the same market.
• definitionalKen Research and Euromonitor $6.9bn, Saudi Arabia, 2025Euromonitor counts pumps, compressors, taps and valves together, a wider category than industrial valves.
• definitionalMordor Intelligence $0.98bn and The Business Research Company $4.3bn, 2025AI note generation against clinical documentation improvement, a wider set of software and services.
• definitionalMordor Intelligence $83.29bn and Frost & Sullivan over £35bn, UK facilities managementAll facilities management against the outsourced segment only, in different years and currencies.

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