Reading what the seller sends: the listing, the CIM, and what to do when there isn't one

The short version

• You will see three levels of information: the listing, the CIM and, later, the detailed records.
• The listing is a teaser. The CIM, or confidential information memorandum, is the seller's full story and numbers.
• Read the CIM for what it shows and what it leaves out. Every CIM is written to sell.
• Many smaller and unlisted businesses have no CIM. You will need to ask for the basics yourself.
• Check the numbers against tax returns before you trust them. That comes in due diligence.

The three levels

The listing. A short public summary: the industry, the general location, revenue, earnings and asking price. Enough to decide whether to ask for more.

The CIM. After you sign an NDA, a full document about the business: its history, operations, customers, team, financial results and reasons for selling.

The detailed records. Tax returns, bank statements, contracts and more. Usually shared after a letter of intent, in due diligence. Step 7 covers this.

How to read a CIM

Read it twice. Once for the story. Once for the gaps.

Look for:

• Three to five years of results, so you can see the trend.
• How earnings are calculated, and the list of add-backs. Lesson B5.3 covers this.
• How customers are spread. One large customer is a risk.
• Who does what, and how much depends on the owner.
• Whether the lease, key contracts and licenses can transfer.
• Why the owner is selling.

Notice what is missing. A CIM is written to present the business well. What it does not say is often as important as what it does.

When there is no CIM

Many smaller businesses, and most unlisted ones, have no CIM. Ask for the basics:

• Three years of tax returns and financial statements, or a summary to start.
• A list of add-backs the owner believes apply, with an explanation of each.
• Revenue by customer, with customers shown as codes.
• A summary of employees by role and tenure.
• The lease, or its main terms.

Be patient. An owner without a broker may not know what buyers need. Explain what you are asking for and why.

Trust, then verify

The CIM is the seller's version. It is not checked by anyone. Treat the numbers as a starting point. Your CPA, and your lender, will check them against tax returns and bank statements later.