% of CIMS that actually turn out to be accurate

searcher profile

March 06, 2022

by a searcher from University of Oxford in Charlotte, NC, USA

Mainly for traditional searchers but anyone who has seen a number of deals and done DD behind them....what percent of CIMs/OMs have you seen that after DD actually prove to be accurate? Just kind of trying to gauge this industry trend

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commentor profile
Reply by a searcher
in New York, NY, USA
What is "accurate"? The vast majority of the contents of a CIM are subjective and there might not ever be a shared, objective truth for you and the seller to compare against. It can be just as important to question your own assessments of the business, just as it serves you well to question the assumptions of the seller/broker.Even something seemingly simple like revenue can become clouded by topics like customer return policies, supplier rebates, related party transactions, and the recognition of deferred revenue items.

So if you mean to ask whether the EBITDA in the CIM ties to whatever the base will be at closing, then very few. If you mean do they accurately represent the core focus of the business, the material risks and opportunities for the investment, and other strategic considerations, it's more likely to be a non-zero number. But ultimately you should never really be exclusively relying on the CIM, as almost any you see will come with ample disclaimers and indemnifications from whoever sends it disavowing any claims as to accuracy. The larger the deal, the more sophisticated the parties involved, etc., the closer the CIM will likely to be to what the key levels are at closing. If you're attempting to avoid wasted due diligence costs, I encourage you to look at the process more holistically and find corroborating and alternative data points to inform your decision as to whether to move forward vs just going by CIM alone.
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Reply by a searcher
from London Business School in London, UK
0 will be accurate, you have to understand that most brokers will paint the business in a better position that it is since its in their self interest. In term of once DD is done, it will be very different as the CIM is at a point in time snapshot (by people who dont understand the operational aspects of the business) coupled with the fact the business is a liv9jg organism and operationally most businesses will changed by the time DD is completed. Understand the CIM is a snapshot, understand the risks, conduct DD in the areas of material concern to close down as many as you can, and those that remain open will determine whether you proceed.Then understand there will be additional that arise during DD, and other risks that arise post completion.
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