What is a Sell-Side Confidential Information Memorandum?

learn what a confidential information memorandum is and how it works

Understanding a Confidential Information Memorandum and Why It’s an Important Document

For companies selling their business and involved in a sell-side process, a confidential information memorandum (CIM) is a lengthy (typically 50–150 pages) marketing document that provides potential buyers with a detailed first impression of your business before they would meet the selling company in person. It will feature an in-depth description of the business and its operations and will also detail both historical and projected financial information of the company.

Other items typically found in a confidential information memorandum include:

  • Company Overview and History
  • Competitor Overview
  • Contracts
  • Customer Overview
  • Employees
  • Facilities and Equipment
  • Geographic Market Overview
  • Growth Opportunities
  • Industry Overview and Key Metrics
  • Intangible Assets (Intellectual Property, R&D, etc.)
  • Legal and Environmental Items
  • Management Bios
  • Marketing and Sales Team Overview
  • Organizational Structure
  • Product Information and Specifications
  • Production or Service Processes
  • Supplier Overview
  • Technological Capabilities

Who Receives a CIM?

Before potential buyers receive a CIM, the investment banker will provide potential buyers with a no-name executive summary of the business (also known as a teaser). This teaser contains basic information about financials, key acquisition considerations of the business, and key opportunities for the business moving forward. This document will not, however, include the name of the business.

If a prospective buyer is interested after reviewing the teaser, they will sign a non-disclosure or a confidentiality agreement in order to gain access to the full CIM that includes the company’s name and information about its operations and financials.

Why is the CIM Important?

A CIM provides buyers with an accurate, in-depth, first impression of the business as it currently exists, as well as its growth potential for the future. It can help buyers make a quick decision on whether to pursue the company, but more importantly, it creates the framework for the company’s value to the buyer.

The CIM functions as a marketing document to show the attractive aspects of the business and set the stage for maximizing its value during the negotiations. It will also greatly streamline the sales process, as it involves putting together documents and gathering information that the buyer will request during due diligence at a later date.

Key Considerations While Creating a CIM

One of the first things to know about creating a CIM is that it is never too soon for a business owner to start thinking about the kind of data that should be addressed in the document. Pre-sale planning can start months or even years before the actual sale of the company.

When working with your investment banking team to put together a confidential information memorandum, put yourself in the shoes of a potential buyer. By “putting your buyer’s hat on,” you’ll be able to answer the detailed and difficult questions a potential buyer is likely to ask, show your business in the best possible light, and help move the deal forward.

A CIM does not have to fit any specific pattern or profile. It may be a document that is text-heavy, or it could be full of charts, graphs, photos, or videos. The layout and design should depend on the kind of buyer you are hoping to reach, as well as what key aspects and metrics are important for your business and industry.

Work with the Experts When Preparing a Confidential Information Memorandum

When creating the CIM, it’s essential to put together a deal team that features an experienced investment banking firm who can frame the CIM from the right perspective. While it is a factual document, it is also an important marketing material in the sale of your company. Working with a team of professionals to put the CIM together will help you demonstrate the most attractive aspects of your business and opportunities moving forward.

Connect with us today to learn more about this crucial process in the sale of a business, and be sure to follow MelCap Partners on LinkedIn for more updates.

By Al Melchiorre

Al founded MelCap Partners in 2000, and is responsible for managing all aspects of client engagements from proposal through closing, developing business, reviewing offering memorandums and financial models, negotiating purchase agreements, and interacting with buyers and investors.