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CIM Review Checklist

A memorandum is written to sell. This checklist is the sceptical first read: what to extract, what to test against the numbers, what its silences tell you and what to ask the adviser before the second meeting. It is the same set of fields the TrueValue CIM Analyzer extracts and scores, laid out for a reader working by hand.

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Extract

Get these out of the document and into one place before forming a view. Where the memorandum does not state one, write "not stated" — the gap is information.

The business

  • Legal entity, trading name, registered number and location
  • What it sells, to whom, and how it is paid — contract, project, subscription, transactional
  • Year established, employees, sites
  • Ownership and the stated reason for sale
  • Management team, tenure, and who stays after completion

The financials, by year

  • Revenue, gross profit and gross margin
  • Reported EBITDA, every add-back, adjusted EBITDA, and SDE where quoted
  • Which years are audited, management-prepared or forecast
  • Capital expenditure, depreciation, and working capital where shown
  • Net debt and the cash position at the latest date

The shape of the earnings

  • Recurring revenue share, and the definition of recurring used
  • Largest customer and top five as a share of revenue, with contract terms
  • Supplier concentration and any single-source inputs
  • Growth rate claimed, and whether it is historical or projected
  • Owner involvement: the relationships, knowledge and decisions that sit with the seller
  • Asking price or guide, and the basis (cash-free, debt-free; including or excluding property)

Challenge

Every memorandum tells a story. Test the story against the figures you extracted.

Earnings

  • Does adjusted EBITDA outrun reported EBITDA by more than the owner's salary normalisation? List every other adjustment and ask for the evidence
  • Are "one-off" costs one-off, or do they recur in every year shown?
  • Does the gross margin move with the revenue mix described, or against it?
  • Would a market-rate replacement for the owner reduce EBITDA, and by how much?

Growth

  • Is the growth rate in the summary the same as the one the figures show?
  • Does a forecast follow the trend or break from it — and if it breaks, what is the stated cause?
  • Is the order book or pipeline quantified, and how does it convert historically?

Concentration and dependence

  • If the top customer is not quantified, assume the number is uncomfortable and ask
  • Do the largest contracts have change-of-control clauses or renewal dates inside the next eighteen months?
  • Which relationships are held personally by the seller?

The price

  • Convert the guide price to an implied EV/EBITDA multiple on reported and on adjusted earnings
  • Note the basis: cash-free, debt-free; property in or out; working capital target stated or not

What is missing

A memorandum's silences are chosen. Note each one.

Look for

  • A year missing from the history, or a period of less than twelve months
  • A balance sheet absent where a profit and loss is shown
  • Customer concentration described in words but not numbers
  • No mention of the largest competitor, the regulator, or the supplier everyone in the sector depends on
  • Claims — "market leader", "sticky customers", "significant upside" — stated without evidence
  • The reason for sale contradicted elsewhere in the document

Ask

The questions to send the adviser after the first read, before the second meeting.

Questions

  • The last three years of statutory accounts and the latest management accounts, if not in the pack
  • The bridge from reported to adjusted EBITDA with support for each item
  • Revenue by customer for the last three years
  • Contract terms and renewal dates for the top five customers
  • Monthly working capital for the last twenty-four months
  • Which members of management stay, and on what terms
  • The basis of the guide price and any expectations on structure

Decide

The purpose of the first read is one of three honest positions: pursue, pass, or pursue subject to the specific questions above. Write the position down with the reasons, because the memorandum you pass on today may come back in a year and the reasons will matter. In TrueValue the position is a stage on the deal, the questions become the request list, and the figures you extracted are the ones the valuation runs on. See AI CIM analysis for what the product does with the same checklist.

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