The seller series, part 3

The confidential information memorandum will save you a lot of hassles when and if you want to sell your firm, so have one crafted.

A confidential information memorandum, also referred to as the “deal book,” is a document drafted by an M&A advisory firm and used in a sell-side engagement to market a firm to prospective buyers.

The CIM is one of the most important documents prepared in the sales process, because it explains the intricacies of the firm being sold and provides a prospective buyer with the necessary information to generate an initial offer. This is different from a “teaser” because it contains detailed confidential information.

Most design professionals understand the importance of investing in high-quality marketing material to sell their services, but many fail to appreciate the importance of possessing and maintaining professionally prepared materials within their own company. This investment is instrumental when it comes time to explore an M&A transaction. Having a well-crafted CIM will have a substantial impact on the success of the M&A process in three areas: speed, efficiency, and buyer perception. It’s also important for the CIM to clearly articulate all of the firm’s attributes in order to fetch a premium valuation.

Why do you need a CIM? After a prospective buyer has been identified and an NDA has been executed, what do you do next? This is where a CIM comes into play. Its purpose is to help other firms understand your company and the unique strategic investment opportunity it presents.

The typical components of a CIM within the AEC industry include:

  • Executive summary
  • Company history
  • Professional services/capabilities and sample projects
  • Management team structure
  • Growth opportunities
  • Competitive landscape or industry outlook
  • High-level financials (five years of historical data and projections, if available)

Apart from initial screening, a carefully prepared CIM will save you time in a number of ways. Imagine you approach 30 targeted potential buyers. Fifteen of the buyers express a preliminary level of interest, sign an NDA, and request additional information. Without having a prepared CIM, the next step would include participating in 15 separate conference calls, in which you would certainly need to answer the exact same questions again and again. The conference calls would lead to more one-off phone calls and emails leading to lost time and more costs for your firm.

With a carefully crafted CIM, you can accomplish the equivalent of these conference calls, phone calls, and emails with one document. Once a prospective buyer reviews the CIM, they can quickly determine if they want to pass or move to the next stage in the deal process. Buyers will always want to speak with firm management over the phone, visit the firm in-person, meet the team, and tour facilities to get a clear picture of the firm. But the CIM should set the tone for all discussions and set expectations for the transition.

Areas that should be discussed in detail include:

  • Client diversification
  • Ability and plan to achieve future projections
  • Future growth opportunities
  • Strength of management team
  • Scalability of operations

It is hard to believe, but I know plenty of business brokers who think that a CIM is too much work or that less information to the buyers is best. In my opinion, selling a firm without a CIM is a formula for frustration and, most likely, failure. Business brokers who rush to market and skip such a vital step will probably disappoint their clients.

If you are considering selling your firm, I urge you to hire an M&A advisor who will invest the time to present your firm in a professional manner which you and your shareholders deserve.

Noah Hunt is a consultant with Zweig Group’s merger and acquisition services. Contact him at or at 479.856.6244.

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Posted in Archives, Marketing, Mergers and Acquisitions | January 1st, 2018 by