Who writes a CIM for a small business sale?

Usually the broker or adviser running the sale, with the owner supplying the facts and the figures. If there's no adviser, the owner can write it or bring in a specialist writer, which makes more sense once the likely buyers are private equity firms or larger trade buyers who'll read it in detail.

How long is a CIM, and how long does it take to write?

CIMs for lower-middle-market deals commonly run to 40 to 80 pages, and a small business can need far fewer. Drafting usually takes two to four weeks once the financials and the other information are ready, and gathering that information is often the slower part.

How much does a CIM cost?

With an M&A adviser it's normally covered by their retainer and success fee. Written on its own, the price depends on the complexity of the business, the state of the numbers, the length and the design, so I quote each one from a project brief and send a written quote within two working days.

Who writes a CIM, and what does one cost?

Most CIMs are written by whoever runs the sale, but plenty of sales have nobody running them. Who writes one, what goes in, how long it takes and what moves the price.

When an owner asks me who writes a CIM, they’ve usually just been told they need one, by a buyer, a broker or an investor, and they’re trying to work out whether it’s a job for them, their accountant or someone they’ll have to pay. The short answer is that whoever runs the sale normally writes it, but plenty of sales don’t have anyone running them, and that’s where it gets more interesting. I started out putting together prospectuses and investor communications in asset management, and I’ve since helped build and sell a company to American Express and co-founded and sold another, so I’ve seen these documents from the side that writes them and the side that reads them.

What a CIM is, and who reads it

A Confidential Information Memorandum is the detailed document a serious buyer or investor reads once they’ve signed a non-disclosure agreement, usually after a short anonymous teaser has got them interested. It sets out the business, its market, its customers, its people and its numbers in enough depth that a buyer can decide whether to make an offer and roughly what to offer, and in the UK you’ll often hear it called an information memorandum or a sales memorandum instead. The people reading it are private equity firms, trade buyers, family offices and later-stage investors, and they read it properly, often with an analyst working through the financials line by line, so it’s a very different thing from a pitch deck that gets skimmed in a couple of minutes.

Who usually writes one

There are four routes, and which one makes sense depends mostly on the size of the deal and whether you’ve already got an adviser on board.

If you’ve appointed an M&A adviser or a corporate finance house to run the sale, the CIM is part of their job, drafted by their team with you supplying the facts, and the cost is normally folded into their retainer and success fee rather than billed on its own. On a larger deal that’s usually the right answer, because you’re paying for the buyer list and the process as much as the document.

On smaller sales a business broker will often prepare a sales memorandum as part of taking the business to market, though the depth varies a lot, and on some listings it’s closer to a few pages of headline figures than something a private equity analyst would work from.

Plenty of owners write their own, often with an adviser or broker helping. For a small, simple sale that can be perfectly sensible, because nobody knows the business better than you do, but owners tend to write what they’re proud of rather than what a buyer needs to see, and they rarely spot the gaps a buyer will.

A specialist writer is the fourth route, and it’s the one I take on. It makes most sense when no adviser is writing it, when an adviser wants it written outside their own team, or when you’re raising a larger round and the investors want more than a deck.

What goes in a CIM

There’s no legal format, but the order is fairly settled and buyers expect to find things where they usually are. You open with a confidentiality notice and an executive summary that makes the whole case in a page or two, then the investment highlights, the history of the business and what it does, the market and the competition, your customers and how concentrated they are, the management team, the historical financials with any adjustments explained, the forecasts, the growth opportunities, and finally what you’re looking for from the deal. What matters more than the list is that the story and the numbers agree, because a buyer who finds the narrative promising growth that the forecasts don’t show will stop trusting everything else in the document. I’d also keep the most sensitive detail, such as named customers and pricing, out of the version that goes round first, since it’s being read by people who could end up competing with you if the deal doesn’t happen.

How long it takes

Drafting a CIM usually takes two to four weeks once the information is ready, and getting the information ready is almost always the slow part, since pulling clean financials, customer data and the organisation chart together can stretch the whole job to two or three months. CIMs for lower-middle-market deals commonly run to 40 to 80 pages, while a small owner-managed business can say what it needs in far fewer. The last full CIM I wrote ran to 50 pages for a business going in front of private equity and venture investors, and because the management team had good source material and answered my questions quickly, it was finished in under two weeks.

What drives the cost

What a CIM costs depends on a handful of things you can mostly see before anyone starts, and the biggest is the complexity of the business, so a single-site company with one revenue line is a very different job from a group with several divisions, staff in two countries and a technology platform to explain. Next comes the state of the numbers, because if the accounts need restating, the adjustments need working out or there’s no financial model at all, that’s real work before a word gets written. After that it’s the length and the design, whether it needs building as a framework your team can update each quarter, and how many rounds of comments are likely once your accountant and your lawyer have read it.

I quote every CIM from a project brief covering the business, the process you’re running and who’ll be reading it, and you get a written quote within two working days. If you’d rather talk it through first, a consultation is paid separately and starts at $125.

So, before you go to market

Work out first whether anyone is going to write this for you, because if you’ve appointed an adviser it’s already part of what you’re paying for, and if you haven’t, you’re choosing between writing it yourself and bringing someone in. Either way, get the numbers clean before anyone starts writing, hold the sensitive detail back for later, and make sure the story and the forecasts say the same thing. If you’d like it written for you, you can see how I approach CIM writing for a sale or a raise, and if you’re still deciding whether a deck will do the job, what investors read in a pitch deck is a good place to start.