Confidential Information Memorandum

A confidential information memorandum (CIM) is a document created by an M&A consulting company or investment banker to advertise a business to prospective purchasers during a sell-side engagement.

A CIM, sometimes known as a “book,” will usually include the following:

• A full explanation of the company’s operations;
• A synopsis of the industry and market opportunities;
• Financial data, including historical outcomes and estimates for the future; and
• An overview of the auction process, including the proposed deal structure and deadlines for receipt of expressions of interest or letters of intent.

The CIM is one of the most significant documents generated during the sales process because it provides information to prospective buyers in order for them to make an initial offer. The book will typically not include a purchase price for the business but will offer the prospective buyer enough information to properly assess the transaction. To obtain a premium valuation, it is critical for the CIM to properly define all of the company’s attributes.

Areas that should be described in detail include:

• Customer diversification;
• Barriers to entry from competitors;
• Ability and plan to achieve future projections;
• Future growth opportunities;
• Strength of management team;
• Scaleability of operations; and
• Opportunities in the external marketplace.

Before distributing the secret information memorandum to possible financial or strategic purchasers, the seller should properly analyse it. Professionals such as M&A counsellors and investment bankers are familiar with the sales process, but no one knows the business better than the seller. To achieve the best terms and the best price, it’s critical to highlight all of the company’s valuable assets in the CIM.

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