A Confidential Information Memorandum (or CIM for short) is a document used during the M&A process that includes crucial information about the business that is for sale. Occasionally referred to as a ‘Sales Memorandum’, it will include items such as operations information, financial statements, info on the management team, and more. In a way, it is the written equivalent of your first opening pitch to any buyers. Because of this, it’s important to make sure all the info included is accurate, so that potential buyers get a good picture of what your business is about (and why they should buy it!).
Who makes the Confidential Information Memorandum (CIM), and who is it for?
An advisory firm or investment firm will be recruited to help with the M&A process, and it tends to be the case that they’ll handle the production and distribution of the CIM. The CIM is produced by the seller side of the deal, for the sole purpose of convincing a buyer(s) to go through with the transaction. There’ll be a large focus on the future of the company – expected growth results, financials, scalability and potential barriers from competitors. Much of this data will be stored in a data room, your best bet for securing and facilitating your deal.
What a CIM is not…
A CIM cannot be used as a legally binding contract. It’s more of a marketing document to help try and sell a company, as we’ve mentioned. It also won’t (and shouldn’t) be used as a valuation tool. There are plenty of better alternatives when it comes to valuing a company. It’s simply a way for the seller to provide more in-depth details on the functioning of their company, so the buyer knows what they are (potentially) signing up for. Making sure you provide buyers with the right tools so you can audition your company in it’s best light is paramount.
Do you need a CIM?
A CIM isn’t necessarily obligatory, but it’s certainly a good idea to have one. It gives the buyer a great deal of information about your business. Crucial financial information, your awesome management team, the list goes on! The more detailed information you give, the better the understanding the buyer will have. Who knows, it could be the difference from you getting a deal or not!
