Confidential information memorandum (CIM)
A confidential information memorandum is the detailed document describing a business for sale, provided to qualified buyers after they sign a confidentiality agreement. It identifies the business and sets out its operations, financial performance, customers, staffing and growth opportunities.
A CIM is prepared by or for the seller, which is the most important thing to know when reading one. It is accurate in the sense that its numbers should reconcile to the financial statements, and it is a marketing document in the sense that it presents everything in the best available light.
How to read one critically
- Reconcile the adjusted earnings back to filed statements and returns, line by line
- Read the add-back schedule closely — that is where optimism concentrates
- Look for what is absent: customer concentration, owner hours, deferred maintenance, staff turnover
- Treat the growth opportunities section as the seller’s hypothesis, not as revenue
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentSelling a business
- 02Treadstone LawLegal commentaryHow to Read a Business's Financial Statements Before You Buy in Ontario
- 03Treadstone LawLegal commentaryCleaning Up Financial Statements Before Selling Your Ontario Business
- 04Treadstone LawLegal commentaryHow Long Does Due Diligence Take When Buying a Business in Ontario?
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