Information Memorandum

A CIM is a professionally prepared summary of your business that’s presented to pre-screened buyers. The CIM is longer than the teaser profile and reveals the identity of your business and other confidential information.

The CIM addresses buyers’ common questions quickly and efficiently, saving you time from relaying this information orally to each buyer, and thereby helps ensure a consistent and professional presentation. It includes information on your business regarding your company’s history, products, services, licensing, and competition. It also customarily includes a short financial summary, information about your operations, a synopsis of your lease terms, an organizational chart, terms of the sale, and other key information that a buyer might request before submitting a letter of intent. 

The purpose of the CIM is to help the buyer decide if they’d like to take the next steps and learn more about your company – which is usually a conference call or a tour of your facilities. By design, the CIM doesn’t address every question the buyer may have, but rather, it gives the buyer enough information to determine if they’d like to learn more about your business.

Here are the major topics typically covered in a CIM:

• Assets
• Competition
• Customers
• Equipment
• Facilities
• Financials
• History
• Improvement potential
• Intellectual property
• Inventory
• Operations
• Product or service pricing
• Product or service description
• Proposed deal structure 
• Staff

The CIM addresses buyers’ common questions quickly and efficiently, saving you time from relaying this information orally to each buyer, and thereby helps ensure a consistent and professional presentation.

Benefits of Preparing a CIM

Saves Time

When selling a business, you’ll quickly learn that all buyers ask the same set of questions. Without a CIM, you’ll constantly answer the same 50 questions from every potential buyer, which will quickly become tiring and time-consuming. A CIM replaces what might be a one-to-two-hour discussion with each buyer by efficiently answering common questions about your business, allowing you to focus on running your company instead of fielding questions from buyers about your business.

An efficient process saves you time and keeps you fresh when a serious buyer enters the fray. This is important because many buyers are tire-kickers who may not be serious or may be looking to pick up your business at a bargain price. You can fill calendars with wasted time talking with these types of buyers. And not only will they waste your time, but you may lose your patience or become dismissive when you finally have a real buyer on the hook. Making the effort to prepare a CIM saves time and ensures you’re at your best when you do ultimately meet with a buyer.

Helps You Prepare

When an M&A advisor assists you in preparing your CIM, you will have the opportunity to discuss your business in depth with an expert who is familiar with what buyers are looking for. This not only forces you to objectively examine your own business, but it also gets you ready to field the dozens of questions any buyer may ask. For example, many buyers will want to know who your key employees are and whether they’re likely to stick around after the transition. Being familiar with these questions – and answers – by including them in your CIM will prepare you for the eventual one-on-one conversations you’ll ultimately have with serious buyers.

An experienced M&A intermediary will have crafted hundreds of CIMs and will be adept at presenting your business in the best light possible. You’ll also have the chance to rehearse your answers to such common questions as:

• Why are you selling your business?
• If your business has untapped potential, then why don’t you keep it?
• Who are your competitors, and how do you stack up against them?
• What’s your competitive advantage?
• How much working capital is required to operate your business?
• How experienced is your management team?
• What is your role in the business, and how instrumental are you to the ongoing operations?
• How can you grow your business?
• What methods are you using to market your business?

Communicates the Value of Your Business

Often, a buyer may talk to others who assist in making their decision, such as accountants, attorneys, investors, or other C-level executives. In the absence of a CIM, the buyer must sell the idea of investing in your business to third parties on their own. A CIM allows you to convey your business more directly to the buyer’s team and thus maintain a consistent line of messaging. With a professionally prepared CIM, the buyer can simply present this document to the other stakeholders and then have an intelligent discussion based on the contents of the document. 

Provides You With Perspective

Reviewing your CIM gives you a unique opportunity to view your company from a fresh, realistic perspective, as if you were a buyer. A CIM is a great way to align your perceptions of your business with how they can be best presented to buyers. You’ll be better prepared for negotiations and will be able to position your business in the best light possible as a result.

Communicates That You’re Serious

Preparing a CIM also communicates to the buyer that you’re serious about selling your business. Buyers receiving a CIM rather than a rote series of answers to the most common questions are more likely to take you seriously and treat you with respect. Every experienced buyer has dealt with a less-than-committed seller, and buyers are quick to dismiss a seller who isn’t perceived as serious.

Reviewing your CIM gives you a unique opportunity to view your company from a fresh, realistic perspective, as if you were a buyer.

Tips for Preparing a CIM

Include the Right Amount of Information

The story of your business should be presented in a coherent, professional package. Your CIM should provide answers to the basic questions every buyer will ask and contain enough information for the buyer to decide if they’d like to invest time in meeting with you and learning more about your business. Questions with more nuanced answers should be reserved for a phone call or face-to-face meeting. Your CIM shouldn’t answer all of the buyer’s questions but should provide enough information for the buyer to decide if they’d like to proceed to the next steps.

Present the Highlights of Your Business

Your CIM should present the key selling points of your business in a persuasive story. Remember, the purpose of the CIM is to sell. But, readers of CIMs are sophisticated and won’t be keen to read a document filled with hyperbole. Strike a balance between presenting information and selling your company. Point out the benefits of your business in a straightforward, no-nonsense manner. 

In presenting your business, you should clearly identify its weaknesses, which gives you the earliest opportunity to position them in the best possible light. Weaknesses can often be positioned as potential opportunities for a buyer. For example, if you haven’t invested heavily in marketing your business in recent years, this presents a tremendous opportunity to the buyer to increase revenues. You’ll be in a much stronger negotiating position if you point out your business’s weaknesses first and spin them in a positive light as opposed to a buyer uncovering them later in the process.