drafting-confidential-information-memoranda

# Drafting Confidential Information Memoranda

## When To Use

- Preparing sell-side marketing materials for a company sale, recapitalization, or strategic investment
- Creating a CIM (also called an Offering Memorandum or Information Memorandum) for distribution to prospective buyers under NDA
- Positioning a company's value story for a competitive auction or targeted outreach process
- Refreshing or updating an existing CIM for a new round of buyer marketing

## Inputs To Gather

- **Company overview**: Legal name, headquarters, founding year, ownership structure, employee count, key locations/facilities
- **Business description**: Products/services, customer segments, end markets, go-to-market model, competitive positioning
- **Historical financials**: 3–5 years of income statements, balance sheets, and cash flow statements (audited preferred)
- **Adjusted EBITDA bridge**: Management adjustments with supporting detail (one-time costs, owner compensation normalization, pro forma adjustments)
- **Growth initiatives**: Organic growth levers (new products, geographic expansion, pricing), M&A pipeline if relevant
- **Customer/revenue data**: Top customer concentration, contract structure, recurring vs. non-recurring revenue split, retention/churn metrics
- **Management team**: Key bios, tenure, roles post-transaction (who stays, who transitions)
- **Deal parameters**: Indicative process timeline, transaction structure preferences (asset vs. stock), seller objectives, any carve-out complexities
- **Market/industry data**: TAM/SAM sizing, industry growth rates, relevant macro trends, competitive landscape
- **Confidentiality constraints**: Code name for the company, any information to redact from early-stage materials

## Workflow

1. **Confirm scope and deal context** — Identify transaction type (full sale, majority recapitalization, minority investment). Clarify whether the CIM is for a broad auction, limited process, or single-buyer negotiation. Determine target page count and level of financial detail.

2. **Build the executive summary** — Draft a 1–2 page overview covering: investment highlights (3–5 bullet thesis points), business snapshot, key financial metrics (revenue, EBITDA, margins, growth rate), and transaction overview. This section sells the opportunity at a glance.

3. **Draft the business description** — Cover company history, mission, products/services in detail, value proposition, and operational model. Use clear sub-sections for each business line if the company is diversified. Include facility/operations overview with maps or diagrams where helpful.

4. **Present the industry and market overview** — Summarize addressable market size, growth dynamics, regulatory environment [VERIFY], and competitive landscape. Position the company within the market using frameworks buyers expect (market share, differentiation, barriers to entry).

5. **Detail the growth strategy** — Articulate 3–5 specific, credible growth drivers with supporting evidence. Distinguish between organic initiatives (product launches, pricing, cross-sell) and inorganic opportunities (tuck-in acquisitions, geographic expansion). Quantify the revenue/EBITDA impact where possible.

6. **Compile the financial overview** — Present historical performance (3–5 years), adjusted EBITDA reconciliation with footnoted adjustments, key financial metrics and KPIs, and a management case or projections if authorized. Include quality-of-earnings-style normalization where applicable.

7. **Draft the management and employee section** — Provide bios for senior leadership, organizational chart, and headcount breakdown. Note any key-person dependencies and post-close retention expectations.

8. **Add supplementary sections as needed** — Customer overview (anonymized if early-stage), technology/IP summary, real estate and asset detail, environmental or regulatory considerations [VERIFY].

9. **Review and polish** — Ensure narrative consistency, verify all figures tie to source financials, confirm adjusted EBITDA bridge foots, and apply professional formatting (table of contents, headers, page numbering, disclaimers).

## Output

A complete CIM document structured as follows:

- **Disclaimer / Confidentiality Notice** — Standard language limiting liability, noting forward-looking statements, and restricting distribution
- **Table of Contents**
- **Executive Summary** — Investment highlights, financial snapshot, transaction overview
- **Business Description** — History, products/services, operations, facilities
- **Industry Overview** — Market sizing, trends, competitive positioning
- **Growth Opportunities** — Specific, quantified growth drivers
- **Financial Overview** — Historical performance, adjusted EBITDA bridge, key metrics, projections (if included)
- **Management Team** — Bios, org chart, post-transaction roles
- **Appendices** — Customer detail, asset lists, supplementary financial schedules

## Quality Checks

- **Financial accuracy**: Every figure traces to source documents; adjusted EBITDA bridge balances correctly; historical and projected periods are clearly labeled
- **Narrative consistency**: Investment thesis in the executive summary aligns with growth drivers and financial projections throughout
- **Adjustment transparency**: Each EBITDA adjustment includes a brief explanation and magnitude; no unexplained or unsupported add-backs
- **Customer concentration**: Top 10 customer revenue percentages are disclosed; any customer representing >10% of revenue is flagged
- **Confidentiality controls**: Company code name used consistently; no identifying information leaks in early-stage versions; disclaimer page is present
- **Market claims sourced**: Industry stats cite specific sources (e.g., IBISWorld, Statista, trade associations) with dates [VERIFY]
- **Regulatory / tax items flagged**: Any jurisdiction-specific regulatory, environmental, or tax matters marked [VERIFY] for deal counsel review
- **Professional presentation**: Consistent formatting, no orphaned headers, tables fit pages cleanly, charts are labeled with units and time periods