Confidential Information Memorandums (CIMs)

What is a Confidential Information Memorandum (CIM)?

If you’re a software CEO looking to sell your business or raise capital, it’s crucial to understand the importance of a confidential information memorandum, or CIM. After all, a confidential information memorandum is a critical step in the preparation phase for any liquidity event.

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What to Consider

The CIM tells the story of your business: where it came from, what it is today, and the potential it has for the future. It highlights the company’s strengths and opportunities and makes the case quantitatively and qualitatively why the business is an exciting opportunity. Investors and strategic acquirers alike use the document to evaluate opportunities and assess their level of interest. In short, the CIM is an essential marketing document that is crucial for positioning the company and establishing the key themes and opportunities for the business that will guide the rest of the process.

However, every business is unique, and the CIM should reflect that. CIM structures vary by sector, product category, and financial profile, among other variables. They are also time-consuming to produce, and properly positioning a complex business is difficult, especially if you’ve never previously done it. That’s why having a trusted M&A advisor to guide you through the process is crucial for ensuring the company is properly positioned to be best received by the buyer community, ultimately leading to a strong outcome.

To help software CEOs understand a proper CIM structure and purpose, this guide addresses the following questions:

  • What is a confidential information memorandum (CIM)?
  • Why is a CIM important for selling your software company?
  • What are the benefits of creating an engaging CIM?
  • What are the best practices for developing a CIM?
  • What should be included in a CIM?
  • Who receives the CIM, and how will they use it?

Follow along as we dissect exactly what software companies should know about preparing and using a CIM.



What Is a Confidential Information Memorandum (CIM)?

A Confidential Information Memorandum (CIM) is a document for prospective buyers that is created at the beginning of a sell-side M&A process in which pertinent information about products, services, financials, organization, and market potential are compiled. You sometimes may see the CIM referred to as an Offering Memorandum (OM) or Information Memorandum (IM).

In other words, the CIM tells the story of your software company in a way that prospective buyers will relate to. It should be both a compelling story and data-comprehensive, using narrative tactics and qualitative information backed up by data and quantitative metrics.

A CIM can be anywhere from 30 to over 100 pages, depending on the depth and breadth of information included. The time to complete this document relies on the scope of the CIM and the level of detail.

Note: While some M&A advisors will ask the seller to prepare their own CIM, at SEG, we recognize that while you’re the expert in your business, we’re the experts at best positioning your business to the buyer community. Rather than make you start from ground zero, we dive deep into your company to learn your business’s nuances and give it the attention to detail it deserves to maximize the potential outcome.

At SEG, we speak the language of the buyer. Nowhere is this more important than in the CIM — the first touch point many buyers have with your company and the guiding document throughout an M&A process. Learn more about how SEG can help you write a successful CIM here.



What a Confidential Information Memorandum Is Not

Before we dive too deep into CIM best practices, it’s also important to consider what a CIM is not. Here’s a quick list for reference.

Remember, a CIM is NOT:

  1. A legally binding agreement
  2. A document with direct valuation feedback
  3. A pitchbook

First, a CIM is not a legally binding contract. Rather, the CIM serves as a marketing document with the intent of persuading potential investors to take a closer look at your company. Unlike an LOI or IOI, a CIM does not indicate intent by either party.

It goes without saying that this doesn’t mean the CIM should contain untrue or misleading information just for the sake of looking more attractive to investors. Trust us: it’s easier to explain rough spots now than wait for them to come up during due diligence anyway.

Similarly, a CIM should not include any information about valuation. Valuations come into play at a point in which buyers are comfortable with providing feedback based on what they understand about the business. A CIM is more about educating the buyers and piquing interest than setting down a price.

Lastly, CIMs are not pitchbooks. Think of it like this: a pitchbook is used by an investment bank to persuade a company to use them to sell their business. A CIM is created by that investment bank you hired in order to persuade someone else to buy your business.



Why Is a CIM Important for Selling Your Software Company?

The CIM’s purpose is to help buyers make an informed evaluation about purchasing your software business. A CIM helps buyers make the go/no-go decision about whether to move to the next stage of an M&A process.

Without a CIM to tell your story in a way that accurately and clearly depicts your business, you run the risk of inefficiently using both your and the buyer’s time. CIMs are an essential step for any software company that’s serious about a merger or acquisition.



Seller Benefits From Creating an Engaging CIM

As we mentioned before, a CIM is an opportunity to craft the narrative around your business to potential buyers.

An engaging CIM has multiple value-additive benefits for the seller, including:

  • Maximizing value: A well-argued CIM shows buyers you have a deep understanding of your business and the opportunities it ahead. If you can share that excitement with buyers through an engaging CIM, it will go a long way in maximizing value.
  • Generating more interest (aka more competition): A detailed and well-positioned CIM creates more interest with buyers, which in turn creates more competition during the M&A process.
  • Time: A comprehensive CIM enables buyers to have a clearer picture of the business. This creates an apples-to-apples view of the opportunity to ensure both buyers and sellers are effectively utilizing time as interest develops in the process.
  • Decreased chance of re-trades: A CIM can serve to make important disclosures early on rather than later in the process when a buyer might be more spooked by surprises. By bringing up potential problem areas early on in a CIM, you can position your company around the negatives of your business, so you’re upfront from the get-go.


4 Quick Best Practices for Developing a CIM

While writing and developing a CIM isn’t something the seller usually handles on their own, we’ve compiled a list of best practices for sellers to consider as they move forward in any M&A process.

The most crucial factor to consider before building a CIM is that you must have a fundamental understanding of what value your business provides, where it has come from, where it is today, and where it can go. M&A is driven by the rearview mirror, meaning that before buyers and investors get excited about the key opportunities propelling your company forward, you must first establish the fundamentals of your business within the CIM. This includes thorough detail about who your business serves, its current strengths and weaknesses, how it is positioned in the industry and against competitors, and near-term and accessible growth opportunities. After this is laid out, only then can you get buyers excited about the future of your business and use a well-planned growth ahead section to help maximize potential value for your business.

Here are some other tips to keep in mind:

  • Make it a story.
    Remember, a CIM is the first narrative you get to craft about your business. Make sure you’re not just jotting down facts and figures. What’s the story behind it all that makes your business compelling? Make sure to deliver a clear message to your audience.
  • Be data-driven.
    Use data to tell your story. It’s a pretty compelling narrator. Remember only to say what you can back up with real data. You don’t want any factual errors!
  • Keep brand consistency.
    Your brand is what you’re selling, so take the opportunity to let it shine. Make sure your CIM sounds and looks like your brand.
  • Keep each message valuable, but concise.
    Remember, it takes hours to read through a CIM. Make every word count by making sure your message is always providing value in the shortest terms possible. You’ll have plenty of time to dive into everything else throughout the remainder of the process.


What Should You Include in a CIM?

What’s included in the CIM depends on the audience. The audience, or potential buyer, usually falls within two categories: strategic or financial buyers. (Quick refresher: A strategic buyer is typically a company hoping to purchase a company to fill a need. Financial buyers usually seek to build an investment portfolio with high-performing businesses.)

For example, you may have different positioning tactics for a financial buyer than a strategic buyer, where it would be beneficial to showcase cost or revenue synergies as you see them. This could look like a CIM that is more focused on targeted revenue growth that more directly translates to the strategic buyer community, operational optimization (strategic sourcing, cost reduction in all functions), and reduction in financial cost and investment (working capital reduction, sale of assets, if applicable).

In summary, keep your end audience in mind when writing a CIM. You don’t have time to share everything, so what you choose to share needs to generate the necessary interest from the buyer community.

While every CIM should be unique, six common sections of the CIM include:

  1. Business overview
  2. Industry and competition overview
  3. Product overview
  4. Customer overview
  5. Growth ahead opportunities
  6. Financial overview
  7. Ownership and organization

Read on for more tips about each of these areas, along with breakdowns of key points inside each subsection.

Business Overview

Sometimes referred to as the Executive Summary, a business overview is a key piece of a confidential information memorandum that discloses an overview of what the company is, what it does, and how it works.

When writing a CIM, consider adding these elements into a business overview section:

  • Company mission or vision
  • Founding story with supporting details
  • Information about leadership team
  • Overview of product offerings and roadmap
  • Business model and pricing

Industry & Competition Overview

To best lead the potential acquirer to an informed decision, it’s important they know exactly how your company is positioned in your market, and what market trends are currently impacting the company. This section of a CIM is all about positioning your business within the broader scope of your industry.

Here are a few items to include in a market overview:

  • Industry trends (tailwinds and headwinds)
  • Market position
  • Competitive analysis
  • TAM/SAM/SOM (total addressable market, serviceable addressable market, and serviceable obtainable market)

Product Overview

This section includes key information about the business’s product offering and technology. Buyers and investors will be interested to learn about the core product offering and how it differs from others in the market.

This section should include:

  • Product overview (key functionality, what the product does, who it serves, etc.)
  • Product detail (detail on modules, different product offerings, core and supplemental products, etc.)
  • Integrations or APIs
  • UI/UX and mobile capabilities
  • Product roadmap
  • Technology architecture
  • Product pricing model

Customer Overview

Just as an acquirer wants to ensure your position in the market is solid, they also want to assess how your customer base looks and where it’s headed. The health of the customer base is the best support for the health of the revenue and of the business, especially for subscription-based businesses. This section of a CIM serves to display how your business serves your customers and what it can look like in the future.

Some typical items to include in your customer overview include:

  • Total customer base snapshot
  • Buyer personas
  • ICP (ideal customer profile)
  • Thorough retention analysis
  • Customer segmentation analysis
  • Top 10 recent customer wins
  • Unit economics
  • Customer testimonials and reviews

Growth Ahead Opportunities

It’s important to use the CIM as an opportunity to prove that purchasing your company would provide growth opportunities for the acquirer. Once buyers are comfortable with where your business is today based on the prior sections, this section is utilized to get buyers excited about the future trajectory of the business. By showcasing the numbers about your sales and marketing efforts, you can demonstrate the company’s upward trajectory.

Some information related to growth that is helpful to include in this section:

  • Sales and marketing opportunities
  • Market expansion
  • Embedded growth opportunities (whitespace, etc.)
  • Product expansion and monetization opportunities
  • Potential M&A segments and opportunities of focus, both near and long term

Financial Overview

Painting a stable and scalable financial portrait of your business is perhaps one of the most important part of a CIM when it comes to generating and maintaining interest. You’ll share actual financial information, projections, and make your company appear as attractive as possible on paper.

Consider providing the following financial information in a CIM:

  • Summary P&L statement
  • P&L revenue details
  • Thorough COGS (cost of goods sold) analysis
  • Thorough operating expenses analysis
  • EBITDA  / adjusted profitability analysis

Ownership, Organization, and Technology Overview

Finally, it’s key for software companies to provide an overview of their ownership and organization when creating a CIM.

An overview of the organization should include the following:

  • Legal corporate structure and ownership
  • Organizational chart
  • Headcount & compensation trends


Who Receives the CIM and How Will They Use it?

A CIM is sent to interested, prospective buyers and investors after signing a non-disclosure agreement (NDA). Since a CIM contains sensitive information about the business, an NDA is required to make sure none of the private information is shared to other parties.

After a CIM is sent, the prospective buyer/investor reviews the CIM thoroughly. Most buyers will skim through a CIM to see if the financials and narrative make sense. Then, they’ll do a deeper read to make sure everything still looks good.

If a potential buyer and investor are interested in learning more, they’ll typically follow up with questions and information requests. Having an advisor to help gauge how to respond to follow-ups and determine what information should be shared at this stage is crucial. If interest remains, additional milestones in the M&A process will follow, including IOIs (indication of interest), LOIs (letter of intent), due diligence, and ultimately going through with the deal.




A CIM is one of the most essential documents in an M&A process. It’s the first chance to persuade a potential buyer or investor that a business is worth looking at. The CIM not only tells a concise and compelling story — it also gives the data to back it up.

In short, a proper CIM provides an accurate depiction of the business for buyers to evaluate, ensures efficient utilization of buyer and seller resources and time, and de-risks the deal prior to the later stages of the process. By following CIM best practices, you can make sure your CIM is digestible and pertinent but keeps the audience wanting more. This results in maximizing a potential outcome and ensuring a high probability of closing.

Executing a successful CIM is best done with the help of a trusted M&A partner who’s been there before. At SEG, we have over 30 years of experience telling a compelling story that speaks the language of investors. If you’d like to learn more about how we can help your business, reach out here.