Confidential Information Memorandum (“CIM”)

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What It Means

A Confidential Information Memorandum (“CIM”) is a document prepared by a Business Broker or Investment Banker for the purpose of marketing a company for sale. It summarizes the key characteristics of the company and is designed to answer initial questions that Buyers may have. The structure and quality of CIMs vary almost as much as the companies they represent, but there are some important elements that are commonly included, such as:

• Overview of the company’s products and services

• Description of market and the company’s market share

• Current and historical financial summary

• Management team details

CIMs contain a substantial amount of confidential information about a company, and should never be shared without a non-disclosure agreement and some initial level of vetting of recipients.

Why It’s Important

A CIM often represents the first interaction a Buyer has with a company that is being offered for sale. It should be developed to highlight the most attractive aspects of the company, but it should also be accurate and truthful. Poorly written CIMs could turn off potential Buyers from the start as a negative reflection of the company or the Seller’s transaction advisors, but misleading or untruthful CIMs are almost certain to lead to a broken deal later in the process. Due Diligence is intended to be thorough and uncover issues, but most transactions are built on some level of mutual trust between a Buyer and a Seller. Once that trust is broken, it is very difficult to recover.

Related Terms

• Boilerplate

• Business Broker

• Indication of Interest (“IOI”)

• Investment Bank

• Letter of Intent (“LOI”)

• Sell-Side

• Seller

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