CIM Analysis Checklist: Every Item to Extract, Verify and Question

How to use this checklist

This is the exhaustive version of the method in How to analyse a CIM. That guide explains the order — extract, challenge, price, decide — and why each step needs the one before it. This page is the list to work through beside the document: for each group, what to pull out, what to test it against, and what to ask when the memorandum does not say. The short form you can print is the CIM review checklist.

Three rules make it work. Write "not stated" where the document is silent, because a gap in a memorandum is a choice somebody made. Keep the extraction apart from your view of it — the figure first, the verdict afterwards. And keep a running list of questions as you go: they are the product of a first pass, and they open the diligence request list.

The business

What the company sells and how it is paid decides which of the later questions matter. A project business, a subscription business and a distributor fail in different ways, and the memorandum's description of the model is the first thing the financial history has to be consistent with.

• Legal entity, registered number, registered office and trading addresses, and every subsidiary, dormant company or recently dissolved company in the group
• What is sold, to whom, through which channels, and the split of revenue by product or service line
• How the company is paid — contracted, subscription, project, transactional or a mixture — with the share of revenue in each
• The market as described, the competitors the document names, and the evidence offered for the position claimed
• The stated basis of the financial information: statutory accounts, management accounts or both, and the accountant or auditor named

Ownership and the reason for sale

The reason for sale is the frame the rest of the document has to fit: a retirement sale with a hockey-stick forecast is a contradiction to resolve before anything else. Ownership tells you who you are negotiating with and whether they can deliver what is being sold.

• Every shareholder and their percentage, plus any options, warrants, growth shares, loan notes or promises of equity
• Whether the shareholders are aligned on selling, and whether any intend to stay or roll over
• The reason for sale in the seller's own words, whether the timing is explained, and whether both match the financial trajectory shown
• Related-party arrangements: property, loans, management charges, family members on the payroll
• Any previous attempt to sell the business, and what happened to it

Management

In most mid-market businesses the value that survives completion sits with the people who are not the owner. The memorandum will describe a strong second tier; the organisation chart and the tenure column will show whether one exists.

• Each named manager with role, tenure, age where stated, and whether they stay after completion
• The owner's actual job: the customers, suppliers, decisions and technical knowledge that sit with the person leaving
• Succession: who runs the business the day after completion, and whether that person is named
• Incentives already in place, and any retention or equity arrangement proposed as part of the transaction
• Functions with nobody named — finance, sales, operations, technical — that a buyer would have to fill

The financial history, by year

Extract each year separately and label it with what it is worth: audited, unaudited statutory, management-prepared or forecast. A memorandum that runs three historical years into two projected ones in a single table is inviting you to read a projection as a trend. Never merge them.

• Revenue, gross profit and gross margin for every year shown, with the number of months in each period
• Reported EBITDA, operating profit and profit after tax, so the arithmetic between them can be checked
• The year-end, and whether it has changed
• Depreciation, amortisation and capital expenditure, split between maintaining capacity and growing it where the document allows
• Working capital: debtors, creditors and stock at each year end, and the movement between years
• Cash and debt at the latest date, including hire purchase, invoice finance, director loans and any government-backed lending
• Whether the latest historical year reconciles to the filed accounts, and every place where the memorandum's figure differs from the filed one

Adjustments to earnings

The bridge from reported to adjusted EBITDA is where most of the price is argued. Each adjustment needs a reason, evidence, and an answer to one question: would a buyer's accountant accept it? Where the seller quotes seller's discretionary earnings instead, the same discipline applies — EBITDA vs SDE explains which figure a price should rest on.

• Every add-back listed individually with its amount in each year, never as one "normalisation" line
• Owner's remuneration and benefits, and the market cost of the role that replaces them
• Costs labelled one-off or exceptional, and whether the same label appears in more than one year
• Capitalised development costs, rent paid to a related party, and any income that is not from trading
• Seller's discretionary earnings where quoted, and exactly what has been added back to reach it
• Pro forma or run-rate adjustments for cost savings, price rises or a new contract, and what evidence the document offers for each
• Your own sceptical adjusted figure, built beside the seller's, with the reason for every difference

Revenue quality: recurring, concentration and contracts

Two businesses with the same EBITDA are worth different amounts if one has next year contracted and the other has to win it again. Concentration is the same question from the other side: what is the earnings figure without the largest customer? Customer concentration risk in M&A covers how to measure and price it; this list is what to extract.

• Recurring revenue as a share of the total, and the memorandum's own definition of "recurring"
• Revenue contracted for the next twelve months, and the terms on which it can be cancelled
• The largest customer and the top five and ten as a share of revenue, in each year shown
• Contract terms with the top customers: length, renewal date, notice period, pricing mechanism and any change-of-control clause
• Customer churn, and any customer lost in the period
• Pricing: when prices last rose, whether the increase held, and any customer with a contractual cap
• Seasonality, and whether the latest period shown is a full cycle

Operations and suppliers

Supplier concentration is customer concentration in reverse, and the property and the plant are where the capital expenditure the memorandum does not show tends to hide.

• The largest suppliers as a share of cost of sales, and any single-source input or component
• Supplier contract terms, exclusivity, and change-of-control or assignment provisions
• Property: each site, freehold or leasehold, lease term, break clauses, rent, and whether the landlord is a related party
• Plant and equipment: age, condition, what is leased, and the spend needed to keep capacity as it is
• Systems: what the business runs on, who maintains it, and whether any licence is in the owner's name
• Accreditations, certifications and insurances the trade requires, and their renewal dates

People

The headcount is a cost line in the profit and loss and a risk register everywhere else.

• Headcount by function and site, split between employed, contracted and agency staff
• Pay and benefits, pension arrangements, and any historical pension obligation
• Key staff below management, and any who hold a customer or technical relationship personally
• Employment terms, notice periods, restrictive covenants, and any collective agreement
• Staff turnover, open vacancies, and how hard the document says it is to recruit
• Any employment dispute, grievance or claim mentioned — or conspicuously not

Legal and compliance disclosures

A memorandum describes; it does not warrant. This group is what to extract and ask about, not a legal review — anything here that could move the price is a matter for your legal advisers in diligence.

• Litigation, disputes and claims, current or threatened, and how the document characterises each
• Licences, permits and registrations the business needs to trade, and whether they are held by the company or by an individual
• Intellectual property: what is registered, what is owned rather than licensed, and whether it sits in the entity being sold
• Personal data held, and any incident or complaint disclosed
• Material contracts with change-of-control, assignment or exclusivity clauses
• Guarantees, indemnities and charges over the company's assets

The price and its basis

A guide price means nothing until you know what it is a price for. Enterprise or equity value, the treatment of debt and cash, the level of working capital assumed to be normal and whether the property is included can move the cheque by more than the negotiation will.

• The asking price or guide, and whether it is stated as enterprise value or equity value
• The basis: cash-free and debt-free; a normal level of working capital; property in or out
• What is treated as debt and what as cash — including deferred income, accrued bonuses, customer deposits and any tax due
• The multiple the price implies on reported EBITDA, on the seller's adjusted EBITDA and on your sceptical figure
• Any stated expectation on structure: deferred consideration, an earn-out, a vendor loan, a management roll-over
• The process: the deadline for indications of interest, and whether other buyers are said to be involved

What is missing

Work through this group last, once the others are filled in, because most of its items are only visible as gaps in the record you have just built.

• A year absent from the history, a period shorter than twelve months, or a changed year-end
• A profit and loss with no balance sheet, or earnings with no working capital or capital expenditure
• Concentration described in words and never quantified
• A market described without the obvious competitor, regulator or dominant customer
• Claims — "market-leading", "loyal", "significant upside" — with nothing behind them
• A reason for sale that the rest of the document contradicts
• Anything a business of this kind would normally disclose that the memorandum does not mention

Questions to send back

The first pass ends with a list of questions, not a verdict. Send the ones the document cannot answer to the adviser as one numbered list, and record each answer against the item it closes. If you pursue, the unanswered ones open the request list — see the M&A due diligence checklist — which in TrueValue's due diligence tools goes to the counterparty, who answers without an account and is chased automatically.

• Please provide the bridge from reported to adjusted EBITDA for each year, with the evidence behind each adjustment.
• Please state revenue from the largest customer and from the top five in each year shown, with contract end dates and notice periods.
• Which of the years shown are audited, and does the latest period reconcile to the filed accounts?
• What is the owner's role today, and who will hold each customer and supplier relationship after completion?
• Please provide debtor, creditor and stock balances at each year end, and capital expenditure by year.
• What is the basis of the guide price, and what level of working capital is assumed to be normal?
• Are there change-of-control, assignment or exclusivity provisions in any customer, supplier or property contract?
• Is there any litigation, claim, regulatory matter or employment dispute, current or threatened?

An adviser who answers quickly and fully is telling you something about the process; one who does not is telling you something too. Either way, the answers and the silences go on the deal record beside the extraction.