1.

0 INTRODUCTION
A few years ago, Google bought Motorola. What were the kind of information Google received that it
decided to purchase Motorola for a whopping $12.5 billion? What are the things that are not known in
the public domain, but are very important for any company to know is put in a document called
Confidential Information Memorandum.

In any M&A deal, once the buyer and seller enter into transaction mode, they sign a NDA, which restricts
either party from using confidential information they are supposed to receive through CIM. The
information contained in the document is confidential as it gives a “detailed insider analysis” of the
company, hence the document is called “Confidential Information Memorandum (CIM)” or “Offering
Memorandum” or “Information Memorandum (IM).”

Who prepares the CIM?

When any company goes through a sale process, it hires an investment banker or M&A advisory firm.
The first step of the banker is to understand the company and gather as much information as possible
from top management to come up with a profile the company.

The banker prepares the CIM and uses it as a marketing document, which is intended to make the
company look attractive as the objective is “not just to sell, but to sell for maximum value.” The reason
why a banker tries to sell it at maximum value is because of the simple fact that his commission is based
on the sale price.

Contents of CIM:

1. Executive Summary

2. Investment Thesis

3. Overview of the Market

4. Overview of the Target Company

5. Products and Services

6. Revenue Profile

7. Employee Profile

8. Customer Profile

9. Financials – Historical and Projections

10. Management Structure

2.0 EXECUTIVE SUMMARY
This one provides a summary of the entire CIM. It contains the following:

 Key Business Products and Service Offerings of the Company

 Financial Overview – Revenue and EBITDA Margins

 The Nature of the Transaction

 Investment Rationale

3.0 INVESTMENT THESIS

It contains the investment rationale in detail, i.e. why would the “target company” be a great fit for the
acquirer. It will show the USP (Unique Selling Proposition) of the company. Typically, it may include the
following:

 The company acts as a platform for market entry and growth

 The kind of partnerships it has with leading players, providing best-in-class services and the
opportunity to build on them for the acquirer

 Upside opportunity from process optimization, cross-selling, cost optimization, automation, etc.

 Blue chip clients and longstanding relationship with them

 Strong Order Book

 Experience of the management and strong capabilities in business expansion

 Strong position locally with international foothold

4.0 OVERVIEW OF THE MARKET

It is imperative for the acquirer to know the market size and current market trends, as he has to operate
in the same. In such a scenario, it is the duty of the banker to give an overview of the market and make
the company’s case stronger. The banker prepares the market overview from credible data sources,
such as World Bank, Gartner, IDC, Forrester, Bloomberg, Reuters, etc. Credible sources provide reliability
to the data points and help the acquirer to better understand the market and formulate the right
strategy.

The overview of the market contains elements like:

 Market size

 Top players in various business segments

 Trend of various product lines

 Growth trends in the market and the driving factors behind them

 Mapping of the competitors with the “target’s ranking”

Sample slide of the market overview:

5.0 OVERVIEW OF THE COMPANY

It contains basic details of the company such as:

 Year of establishment

 Company description

 Business segments and its capabilities

 Revenue, EBITDA and employee details

 Representative set of customers

 Place of headquarters with different office locations

 Recent news about the company

6.0 PRODUCTS AND SERVICES

This section contains detailed analysis of the products and services offered by the company in its day to
day business operations.

For the product categories, the company will include a list of the products it offers under various
segments, the differentiating factors of the products, the target segment of each product, etc.

From a service perspective, it shows the company’s various service offerings, capability of the company,
the end-to-end process of the services it offers, revenue models such as Fixed Price projects or those
based on Time and Material, etc.

Example of Service Capability:

7.0 REVENUE PROFILE

It shows the revenue profile of the company from different aspects, which is very important for the
acquirer. It shows the revenue mix according to Geo, Product, Business Segments, etc. By showing the
information in this manner, buyers can see where the major revenue comes from and if it is aligned with
their business strategy.

Example of a Typical Revenue Profile:

8.0 EMPLOYEE PROFILE

Segregation of the employees is shown so that buyer has a fair idea of existing personnel mix and can
plan changes that will help him achieve cost optimization.

Employee profile can be shown in several ways, including by way of Function, Qualifications, Age, Geo,
Designation Pyramid, etc.
9.0 CUSTOMER PROFILE
For any acquirer, it would be important to know what kind of customers the company would be serving
in future. Some of the popular questions the acquiring company would be interested in includes: Will
the customers be large enterprise customers or too many small customers, years of relationship with
the customers, revenue contribution from Top 5 or 10 customers, etc.

Representative Set of Customers:

10.0 FINANCIAL HISTORICAL &

PROJECTIONS
This is perhaps the most important section from a valuation perspective, as it gives a detailed analysis of
the profit and loss account. It contains actual financial information from previous years, as well as
financial projections by the management of the target company. The assumptions of such projections
are also written so that the buyer understands the rationale for such projections.

Since the target company is preparing the projections, it will try to show the company in a very positive
position and make it attractive in order to achieve a higher valuation.

Example of a Target Company’s Profit and Loss Account:

11.0 MANAGEMENT TEAM
A brief profile about key personnel of the company is shared below, highlighting their role(s) in the
company, years of experience, previous work experience, etc.

12.0 APPENDIX
Appendix A: Target Company Income Statement

Appendix B: Target Company Balance Sheet

Appendix C: Target Company Cash Flow Statement

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