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CIMs: Safeguarding Value in M&A Transactions

The Confidential Information Memorandum (CIM) is a pivotal stake in the ground between sellers and potential buyers during a transaction. As alluded to in Deal Note 25, “Complete Disclosure”, the CIM crafts a strategic narrative that paints the business in the best possible light. However, there is a fine line between being optimistic and making statements that will not withstand buyer due diligence.

Accordingly, sellers must be very careful when preparing the CIM. Over the past 23 years, our firm has learned the ins and outs of selling companies in the middle market of the aerospace and defense industry and knows exactly how to craft a CIM that walks that fine line between being as optimistic as possible and fully defendable in due diligence.

Buyers rely heavily on every detail of information delivered in the CIM to make informed decisions and assess the value of the target company and prepare their offers. Once final bids are accepted and the sellers enter into a Letter of Intent (“LOI”) with a buyer, that grants exclusivity, exhaustive due diligence will begin. At this point, any disparities between the CIM and the due diligence materials will afford buyers leverage to lower the purchase price.

The CIM is the single most important thing in the sale process; it is the decisive factor in the success or failure of the process. An exceptionally well-drafted CIM will afford the sellers the highest possible price with the greatest certainty of close. Anything less than exceptional will either leave money on the table or create substantial risk to the closing.

Have a great day everyone.

Max McFarland