Confidential information memorandum
M&A / Merger ModelThe detailed selling document describing the business, its market and its financials, sent to bidders who have signed an NDA.
Also written: CIM, information memorandum, IM
The CIM is the main marketing document of a sale process: typically fifty to a hundred pages covering the business model, market, competitive position, management, operations and historical and forecast financials.
It is written by the sell side bank to present the business at its best while remaining accurate. It is a selling document, and reading one requires the same scepticism as reading any other, particularly of the forecast, which is management's plan rather than a neutral base case.
It is the basis on which first round indicative offers are made, so it must contain enough to price the business but not so much that a competitor learns anything operationally damaging if the deal never completes.
Its forecast becomes a reference point for the rest of the process. Bidders will diligence against it, and material divergence between the CIM case and what the data room supports is the most common source of a price chip.
Worked example
A 70 page CIM shows EBITDA growing from 28 to 34 over three years and forecasts 46 within two more.
That forecast is management's plan, not a neutral base case, and bidders will diligence against it. The gap between the CIM case and what the data room supports is the most common source of a price chip.
Read the bridge from 34 to 46 first: if most of it is unnamed margin expansion, the number will not survive the second round.