Confidential Information Memorandum

Question 1

• Why must teasers, CIMs etc. be viewed with scepticism?

Answer 1

o The motive of sell side bankers who produce theses is to raise interest from prospective investors and sell the company at the highest valuation so will not dig in to any contentious issues that could raise major flags in a meaningful way

Question 2

• What are the key considerations when looking at a CIM?

Answer 2

o Does it meet investment criteria and financial profile (growth and margin)
o Concentration in a business division, customer or supplier unless long term contracts
o FCF conversion and historical profitability as leverage will be used
o CAPEX requirements/intensity. The higher is unattractive
o Cyclicality and seasonality of cash flows. This is viewed negatively as swings can be problematic for companies with high debt

Question 3

• What is the impact of long-term contracts on customer concentration?

Answer 3

o In a few cases, if there are long term contracts, if concentration is high it is less problematic but could still result in a discount to the purchase price.

Question 4

• What areas are typically included in pre-IOI IC Memos?

Answer 4

o	Business overview 
o	Prelim Investment Thesis 
o	Process Overview 
o	Summary Financials
o	Mini Model 
o	Summary Returns 
o	Initial Data Analysis: Prop data, shared data. LESS COMMON