A Confidential Information Memorandum (CIM) is a document used in mergers and acquisitions to convey important information about a business that’s for sale including its operations, financial statements, management team, and other data to a prospective buyer. A confidential information memorandum (CIM) is a document prepared by a company in an effort to solicit indications of interest from potential buyers. The CIM is prepared early on in the sell-side process in conjunction with the seller’s investment banker to provide potential buyers with an overview of the company for pursuing an acquisition. The CIM is designed to put the selling company in the best possible light and provide buyers with a framework for performing preliminary due diligence.
Who Prepares the Offering Memorandum?
When any company goes through a sale process, it hires an investment banker or M&A advisory firm. The first step of the banker is to understand the company and gather as much information as possible from top management to come up with a profile of the company.
Areas/ Scope of Work
Industry Experience, Locations, Services Strategy, Mission, Goal, Future Road Map, Financial Analysis – Ratios, Trends, Projections Business & Technology Partners and Key Customers Competitive & Regional Skills Media Coverage & Certifications Market & Economy Surveys Key Risks & Mitigation Plans Transaction Proposition & Objective of Investment Key Managerial People with Experiences
An effective Investment Teaser typically includes the following:
Investment Highlights: Examples of investment highlights can be market leadership, ownership of proprietary technology, significant revenue growth, strong alliances and/or partnerships, an extensive sales network, superior production capabilities, an experienced management team, etc.
Company Overview: An investment teaser usually includes a brief description of the geographical regions and the competitive landscape the company operates in. A company description should also be provided to give potential buyers a better understanding of the company. It is critical that the company information is not directly copied from the company’s website, since doing so may enable potential buyers to identify the company when it wishes its identity kept confidential.
Customers Overview: If possible, major customer names should be included to build credibility for the company.
Deal Information: Details on the type of transaction should be indicated (strategic partnership, full sale, partial sale, buyout, etc.) in the investment teaser.
Product and/or Sales Mix: A list of the main products/services offered and the revenue generated from each one.
Financial Summary: A summary of key historical financial metrics (EBITDA, Revenue, Profit Margin, etc.) and forecasted figures. At least two years of historical data in conjunction with at least two years of projected financial figures should be included.
Benefits
Detailed overview/ understating of financials Sets expectation and create interest Helps in decision making Speed up the subsequent stages of the transaction Factors revision of terms and clauses for negotiation
- An overview of the key financials, products or business lines
- A summary of historical financials and projections
- A review of the company’s competitive landscape, operations, business lines, products and strategy
Preparing the Confidential Information Memorandum (CIM)
The seller’s investment banking deal team plays a large role in the creation and distribution of the CIM. Usually, senior deal team members will solicit detail from the seller. The M&A analyst will turn that detail into an appealing presentation. Preparing the CIM can be time-consuming, involving countless iterations and revisions.
The sole purpose of this document is to assist interested parties in deciding whether to proceed with further analysis of a potential strategic transaction involving the company. No attempt should be made in the document to identify the potential risk factors in all cases.
The information contained herein includes forward looking statements regarding future strategy and plans as well as commentary regarding future results of operations and prospects. These forward looking statements are based on current information and expectations and involve a number of risks and uncertainties. Actual plans implements and actual results achieved may differ materially from those set forth in or implied by such statements due to a variety of factors
How companies create CIM
Understanding of the business of seller through financial study, online/website research Preparation and submission of preliminary information requirements Review of Information received and discussion with the seller officials Preparation and submission of teaser & information memorandum for review/discussion of deliverable & finalization post incorporating management inputs
Use of a teaser Document
The teaser document has in recent years become the opening pitch opportunity for entrepreneur’s startup founders. Its primary audience is made up of private equity firm executives, who may see hundreds of them in a year.
For that reason, the rules for its creation have become as formal as those for a resume. In short, they are:
- Keep it short
- Keep it professional
- Keep it factual
