How to read a CIM and find what it leaves out

A CIM is an input, not a conclusion

A confidential information memorandum can look like the whole story. It is not. It is the seller's version of the story, organised to get your attention, written by someone paid by the seller. Nothing about that is dishonest. It is what the document is for.

Your job is to slow it down and see the gap between what the document says and what you still need to know.

Read for the claim behind every headline

Every number on the front page is a claim. Behind each one there is a method, and the method is usually not shown. A headline earnings figure is a claim that a particular set of expenses does not belong to the business. A growth figure is a claim about which two years were chosen. A customer count is a claim about how a customer is defined.

Read each line and ask one question: what would I have to see to believe this. Write the answer down. That list is what you take to the broker.

The asking price is not the value

They are different quantities produced by different people for different reasons. The asking price is what the seller and the broker decided to put on the cover. The value is what the business is worth to you given what you can operate and how you would finance it. A CIM that does not distinguish them is not lying, it is selling.

Notice the categories where fragility shows

You can see these five without any access the seller has to grant.

Equipment condition. Age, maintenance, and whether anything major is about to need replacing. What the photographs show and do not show.

Owner dependency. How much of the business is the owner's relationships, the owner's judgment, or the owner's presence at the counter.

Lease terms. Length, renewal, and whether it transfers. A business in a building it cannot keep is a different business.

Customer concentration. How much of revenue comes from the largest few customers, if that is disclosed at all, and what it means when it is not.

Fragile records. Whether the numbers reconcile to anything, and how quickly a straight question about them gets a straight answer.

These are categories to notice, not a checklist to work. The checklist is a tool and it lives in the course.

Write what needs confirming, then go to the meeting

The broker meeting should confirm what you noticed in the read, not replace the read. Turn up with the list. A buyer who arrives with five specific questions gets treated differently to one who arrives asking what the business is like, and the difference shows in what gets sent afterwards.