Confidential Information Memorandum
May 9, 2025
What is a Confidential Information Memorandum?
A Confidential Information Memorandum (CIM) is a document for prospective buyers that is created at the beginning of a sell-side M&A process. It is commonly used in the context of raising money for a business, whether through selling equity or debt securities.
At the outset of the M&A, information is gathered on the client (the company that is being acquired or sold), which includes company information, its products and services, financials, and information on its industry. The CIM is used to protect confidential information while providing enough information to generate interest from potential investors or prospective buyers.
It summarizes confidential information about a company or its owners to make the company attractive and obtain the maximum value during a financial transaction. It also discloses risk factors involved in making the investment. In other words, the CIM tells the story of the company in a way that prospective buyers will relate to.
A CIM can be anywhere from 30 to over 150 pages, depending on the depth and breadth of information included. The time to complete this document relies on the scope of the CIM and the level of detail inputted.
Key Learning Points
- A Confidential Information Memorandum, otherwise known as the ‘CIM’, is a comprehensive marketing document that summarizes a business
- The purpose of the CIM is to highlight the benefits of owning the company and to help the buyer decide if they would like to take the next steps and learn more about the business
- The CIM is prepared by an M&A broker from company documents and information received from the seller client
- The M&A analyst will turn that detail into a presentation designed to show the company in its best light
- Preparing the CIM can be time-consuming, involving countless iterations and revisions
Contents of a Confidential Information Memorandum
Because a CIM typically includes a large number of pages (in most instances it’s anywhere from 30 to 150 pages), it contains a lot of information on the company, its financials and its industry overall.
The structure and contents of a CIM vary from situation to situation, depending on the audience. The audience, or potential buyer, usually falls within two categories: strategic or financial buyers. In most cases, a CIM contains the following sections:
- Business overview: the executive summary should provide a brief overview of the company and its financial information. This section should include the company’s name, location, products or services, target market, competitive landscape, and growth potential.
- Investment Terms: this section should include a description of the company, its business model, and the investment terms. It should outline the proposed investment terms for potential investors. This includes the type of security being offered, the price per share, and the amount of money it is seeking to raise.
- Industry and competition overview: this section should provide an overview of the company’s target market and how it competes in that market. It should also include a detailed analysis of the company’s sales and marketing efforts, as well as its competitive advantages.
- Target Company Financials: this section should include a history of the target company’s revenue and profits, as well as a forecast for the future. It should also include a balance sheet, statement of cash flows, and income statement.
- Product overview: this section should provide a description of the company’s products and services, as well as any patents or other intellectual property.
- Revenue Profile: this outlines the company’s revenue history, including information on its customers, sales channels, and average order sizes.
- Personnel: this provides an overview of the company’s management team and employees. It should include biographies of the management team and a description of the company’s employee structure.
- Customer Persona: this should provide a description of the company’s ideal customer. It should include information on the customer’s demographics, needs, and pain points so that a potential investor has a good understanding of the ideal customer base.
- Financial Statements: this section should provide copies of the company’s financial statements, including its balance sheet, statement of cash flows, and income statement. Any breakdown of debt, and sales categories should also be included here.
Of course, there are usually more sections, but these are the ones that tend to end up in every CIM. A CIM follows no standard formula; it can be extremely text-heavy or can contain many charts, images and even videos in some cases.
What is a CIM Used For?
CIMs serve several purposes including:
- Share preliminary financial information: more buyers will explore a deal if they receive quality information
- Sets expectations: this sets a professional tone for future discussions, builds credibility, and lets buyers know you’re serious about maximizing value
- Entice buyers to increase their bids: a consistent story with supporting information leads to better offers (conversely, uncertainty produces low offers)
- Satisfy many initial bank information requests in advance: having reviewed a quality CIM, buyers can move quickly to the next stage in the deal process, or move on, which is in everyone’s best interest
- Persuade stakeholders: buyers use the CIM to educate their investors, partners, lenders, CFO, attorney, CPA, and other advisors and stakeholders
- Save your time: a CIM helps you avoid spending time with the wrong buyers. And meetings with buyer candidates will be more productive
- Less renegotiation: fewer surprises during due diligence means less renegotiating and fewer blown deals
- Secure your proceeds: a CIM makes important disclosures, early on – important facts are less likely to be missed when a document like this is used
Once potential buyers review the marketing document, the business broker or M&A advisor can more easily weed out who is interested in moving forward and who is not.
Who Prepares and Receives a CIM?
Usually, the company’s investment banking deal team creates the CIM and also solicits potential investors. The company provides information about its products, operations, market, and so on. The investment banking deal team endeavors to make the company look as attractive a prospect as possible, with a particular focus on writing the executive summary section of the CIM.
Finalizing a CIM can take a few weeks after all the facts are gathered, but it makes the rest of the sale process goes faster, with fewer headaches and missteps. Remember, the goal is not to be for sale; but to sell and maximize value in a sale.
Why CIM Matters
The CIM includes information regarding company history, products, services, licensing, and competition. It also includes a financial summary, information about operations, lease terms, the value of assets and inventory, an employee summary, and terms of the sale.
A CIM gives buyers a snapshot of the company to help them decide whether it’s an opportunity worth pursuing. It creates a basis for the overall worth of the company, its value on the market and whether or not an analyst would be brought in to determine any growth potential. It addresses the buyer’s questions quickly and efficiently, saving countless hours.
How to Prepare a Confidential Information Memorandum (CIM)
To prepare a CIM, it’s best to put yourself into a buyer’s mindset; think of what questions you would ask if you were the one buying a company. Being in this buyer mode will help you think of all the things that need to be brought into the CIM – things that will make the company more attractive, which will lead to a higher selling price or better terms on the investment.
Here are two tips for creating a CIM:
1. Include the Right Amount of Information
The story of your business should be presented in a coherent, professional package. The CIM should include most of the information a buyer needs to know when deciding if they would like to pursue the business.
2. Presents the Highlights of Your Business in a Persuasive Format
The CIM should present the key selling points of your business in a persuasive story. It should also position the negative points in the best light possible.
For example, if the owner has not invested heavily in marketing the business in recent years, this presents a tremendous opportunity to the buyer to increase revenues.
CIP vs. CIM investment banking
Once the financials are put into an organized and presentable form, the M&A banking team will create a Confidential Information Presentation (CIP). A CIP will typically be a 30-page presentation laying out key business metrics and explanations for buyers to evaluate the business at a high level.
Confidential Information Memorandum Example
Providing accurate and correct information for the CIM will account for most of a client’s time spent on preparing for the sale of the business. The client will need to provide all information requested by the M&A advisor and have periodic face-to-face or phone meetings for progress updates.
The time a company spends providing information can be reduced if there is a comprehensive business plan the M&A advisor can draw on. Analysts may be able to help your client gather information to reduce the workload.
CIMs, like investment banking pitchbooks, are not typically available to the public. However, this is an example of a CIM prepared by Bear Stearns in 2007 for American Casino & Entertainment Properties (ACEP)
At the time, ACEP was owned by Carl Icahn and was ultimately acquired by Whitehall Real Estate Funds for $1.3 billion.
Figure 1: Cover page of American Casino & Entertainment CIM 2007
Figure 1: Contents page of American Casino & Entertainment CIM 2007
CIM Template
Download the free CIM template in the free resources section. This will show you the key elements and what to include in each section of a CIM.
What is the Difference Between a CIM and LOI?
A CIM is a comprehensive document that provides detailed information about a company to potential buyers. It includes company history, products, services, financials, and other relevant details.
On the other hand, an LOI is a document that outlines the terms and conditions under which a buyer intends to purchase the company. It is usually less detailed than a CIM and serves as a preliminary agreement before the final purchase contract is drafted.
Conclusion
A Confidential Information Memorandum (CIM) is a professionally prepared summary of a business that is presented to pre-screened potential buyers. 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.
The CIM includes information regarding company history, products, services, licensing, and competition. It also includes a financial summary, information about operations, lease terms, the value of assets and inventory, an employee summary, and terms of the sale. Creating a thoughtful, well-organized, and detailed CIM is a critical element of a successful sell-side effort.