What is a Confidential Information Memorandum (CIM)?

A Confidential Information Memorandum (CIM) or Confidential Information Memorandum is a document prepared for the purposes of mergers and acquisitions (M&A) processes, this is a commercial document that includes important information about the opportunity to transaction in question, includes confidential information about operations, financial statements, the management team, customers, suppliers, among other data relevant to the analysis. This guide will look at the various sections that are included in most CIMs:

Who prepares the Memorandum?

When a company enters a sales process, it is essential to hire a valuation and/or M&A consultancy company. The first step will be to get to know the company and obtain as much information as possible from the management team to prepare a company profile. The consultant prepares the CIM and uses it as the main marketingdocument during the sales process, whose main objective will be to make the company attractive, as the objective will be “not just to sell, but to maximize the value”.

composition of a Confidential Information Memorandum

– Executive Summary

– Investment Thesis

– Market Analysis

– Target Company Overview

– Products and services

– Revenue Profile

– Employee Profile

– Customer Profile

– Financial Statements

– History and Projections

– Management Structure

Below is a detailed analysis of the first three sections of a CIM:

 1. Executive Summary

1-2 page summary covering the following topics:

– Main Products and Services of the Company

– Financial Overview

– Revenue, EBITDA Margins, Cash Flow, Profitability

– The Nature of the Transaction

– Investment Rationale

 2. Investment Thesis

This section of the CIM includes the investment rationale in detail, that is, reasons why the investment presents an attractive return/risk relationship. An investment thesis is a process of presenting premises and conclusions that may include, for example:

– The company acts as a platform for market entry and growth

– The type of partnerships you have with strategic players

– Provides differentiating services and the opportunity for growth and development of partnerships

– Opportunity to increase revenue through process optimization, cross-selling, cost optimization, automation, etc.

– High-level clients with long-lasting relationships

– Experience of the management team and strong capacity for business expansion

– Prominent position in the national market and with international presence

– Potential for synergies

– Excellent financials

 3. Market Overview

It is essential for the acquirer to know the characteristics of the market in which it operates. It is the consultant’s duty to provide an overview of the market and strengthen the company’s interests. The consulting company prepares the market overview from trusted data sources.

A CIM is a confidential document that should only be shared with potential buyers or investors who sign a non-disclosure agreement (NDA). Furthermore, a CIM is not a formal sale or investment offer, but rather a marketing tool that aims to arouse interest and generate dialogue between the parties involved in the transaction.

At ValuingTools we have the experience and expertise to create a well-designed and attractive CIM that adds value to your business and generates interest in the market. It will be your business card for potential buyers or investors who want to know more about your company and its differentiators. Our goal will always be to help you make the best transaction possible for your future.

Carry out a free simulation of your business now to find out how much your company is worth: