In Deal Notes® 9 and 134, we discussed assembling a sell-side M&A deal team, one of the first steps in any sale process. That team prepares the Confidential Information Memorandum (CIM). The CIM forms the basis for buyer bids and establishes the facts that will be referenced throughout the buyer’s post–letter of intent (LOI) due diligence and all the way through closing. For most of the middle-market aerospace and defense (A&D) companies we represent, the CIM addresses four core areas of the business: operations, accounting and finance, sales and marketing, and engineering or the relevant technical function.
We have watched buyers walk away from deals shortly after a member of the seller’s management team said three words about something in the CIM: “That is wrong.” The moment rarely comes early. It typically arrives well after the CIM is in buyers’ hands, during a management meeting or site visit. A buyer asks the head of operations about capacity utilization, or the controller about margins by program, and the answer does not match the book. The manager is not trying to undermine the deal; they simply never saw the CIM. To the buyer, however, the damage is done. If one fact is wrong, what else might be? A buyer who was enthusiastic about the opportunity now questions the numbers, the narrative, and the seller’s credibility. Some buyers re-trade on price. Others quietly withdraw.
The remedy is straightforward: involve the right people early. Before the CIM goes to market, have each functional leader review and sign off on the sections they own. That review catches errors and adds detail that only those closest to the work can provide. It ensures everyone is working from the same set of facts when buyers begin asking questions. And it prepares your team for management meetings, where buyers evaluate your people as closely as they evaluate your business.
Have a great day.
Ryan Kirby
Partner
