What Does Confidential Information Memorandum (CIM) Mean?
A confidential information memorandum (CIM) is a document drafted by an M&A advisory firm or investment banker used in a sell-side engagement to market a business to prospective buyers.
A CIM, also referred to as the "book" will typically include the following:
- A detailed description of the business and its operations;
- A summary of the industry and opportunities within the market;
- Financial information including analysis of historical results and future projections; and
- A summary of the auction process including the proposed structure of the deal and timing for receipts of expressions of interest or letters of intent.
Divestopedia Explains Confidential Information Memorandum (CIM)
The CIM is one of the most important documents prepared in the sales process, because it provides a prospective buyer with the information to generate an initial offer. Typically, the book will not include a purchase price for the business, but will provide the prospective buyer sufficient information to appropriately value the acquisition. It is extremely important for the CIM to clearly articulate all of the company's attributes in order to fetch a premium valuation.
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;
- Scalibility of operations; and
- Opportunities in the external market place.
A seller should review the confidential information memorandum thoroughly before it is distributed to potential financial or strategic buyers. M&A advisers and investment bankers are professionals that understand the sales process, but no one knows the business better than the seller. It is crucial that all valuable attributes of the business are highlighted in the CIM to get the best terms and highest possible price.