What the memorandum is actually for
A confidential information memorandum — a CIM, or simply the book — has one job: give a qualified buyer enough to decide whether to pursue the business, and enough confidence that what they find in diligence will match. It is not a brochure and it is not a pitch deck.
The failure mode is predictable. Owners write forty pages of narrative about the founding story and the wonderful team, and bury the earnings on page thirty-one. A buyer skims for four numbers — revenue, earnings, trend, asking price — and if they cannot find them quickly they move on to the next opportunity.
Sending the full memorandum to an unqualified enquiry wastes disclosure. Sending only a teaser to a serious buyer wastes their time. Stage it — teaser to filter, memorandum after an NDA, data room after an LOI. Each step should cost the buyer something to reach.
The structure that works
Fifteen to twenty-five pages, with the answer to the buyer's first question on page one. Order matters more than length.
| Section | Pages | What it must contain |
|---|---|---|
| Executive summary | 1–2 | What the business does, revenue, adjusted earnings, asking price, why selling |
| Business overview | 2–3 | Products or services, how revenue is actually generated |
| Market and competition | 2–3 | Honest positioning, named competitors, what threatens the business |
| Operations | 2–3 | Facilities, systems, suppliers, capacity, what the owner personally does |
| People | 1–2 | Headcount, key roles, tenure, who stays after a sale |
| Customers | 1–2 | Concentration, retention, contract terms — anonymised |
| Financials | 4–6 | Three years, normalized, with add-backs itemised and supported |
| Growth opportunities | 1–2 | Specific and unexploited, not aspirational |
| Transaction | 1 | Structure sought, transition offered, timeline |
A buyer reviewing twenty opportunities gives each one about ninety seconds before deciding whether to continue. If adjusted earnings and the asking price are not on page one, the document has already failed for the buyers who had the most alternatives — which is to say, the best ones.
The financial section, which is the document
Everything else supports this. Three years plus a trailing twelve months, presented consistently, reconciling to filed tax returns. If your presentation does not tie to the return, explain why in the document rather than waiting to be asked.
Show the bridge, do not assert the number
An adjusted earnings figure with no visible derivation invites suspicion. Show the walk from the tax return, line by line, with a note on what supports each adjustment.
| Line | FY-2 | FY-1 | TTM |
|---|---|---|---|
| Revenue | $1,940,000 | $2,080,000 | $2,200,000 |
| Net income per return | $118,000 | $131,000 | $142,000 |
| Owner compensation | $190,000 | $205,000 | $220,000 |
| Depreciation and amortization | $34,000 | $36,000 | $38,000 |
| Interest | $20,000 | $19,000 | $18,000 |
| Non-recurring — see note 4 | $0 | $22,000 | $14,000 |
| Adjusted EBITDA | $362,000 | $413,000 | $432,000 |
A below-market family salary, related-party rent below market, deferred maintenance. A memorandum with only favourable adjustments reads as advocacy and gets tested line by line. One or two honest downward adjustments materially increase how much of the rest a buyer accepts without argument.
Say the difficult things yourself
Every business has two or three facts a buyer will find and dislike. Customer concentration, a declining segment, a lease expiring, an owner who is the top salesperson. You cannot hide them — diligence exists to find exactly these — and the attempt costs more than the fact.
A weakness you disclose is a term to negotiate. The same weakness discovered is a reason to doubt everything else in the document.
| Issue | How it is usually written | How it should be written |
|---|---|---|
| Concentration | Silence, or 'strong key accounts' | Named share, contract term, tenure, retention history |
| Owner dependence | 'Owner active in the business' | Specific hours, specific roles, transition plan proposed |
| Declining segment | Omitted from the charts | Shown, explained, with the growing segment beside it |
| Lease expiry | Not mentioned | Term, renewal option, landlord discussions to date |
Stating that one customer is 28% of revenue, has been for six years, and is under contract to 2029 turns a discovery into a fact with context. It also lets you argue for the price you want rather than defending the price you asked for after being caught out.
Confidentiality and distribution
- Never send the memorandum without a signed NDA. The teaser is the pre-NDA document, and it should be genuinely anonymous — industry, region, size band, nothing identifying.
- Anonymise customers throughout. 'A national retailer, 22% of revenue, since 2018' conveys everything a buyer needs at this stage.
- Watermark each copy with the recipient's name. It does not prevent forwarding, but it makes a leak traceable and people behave accordingly.
- Log every recipient and date. You will want the record if information appears somewhere it should not.
- Keep employee names out of it. Roles and tenure, not names. Staff finding out from a document is the most damaging leak there is.
- Withhold the true financial detail until an LOI. The memorandum should be enough to make an offer, not enough to replicate the business.
Competitors are often the best buyers and always the highest risk. A competitor who signs an NDA, reads your memorandum and walks away now knows your margins, your customer concentration and your key staff. Stage disclosure more slowly for competitors than for financial buyers, and consider withholding customer detail entirely until exclusivity.