reading through CIMs sucks, they make no sense
how do y’all effectively read through cims on the buyside? i’m a new analyst and i know that i’m taking nearly three times as long to go through these 70+ pg packets than my associates or above. obviously, i understand that with repetition i will get quicker at the reading part. but where i’m still curious, is how often do those experienced in buy side roles feel like they’ve actually absorbed the material presented in a cim? i feel like the words are so jam packed into it and it’s all very incoherent with changing layouts and graphics each new page that it jumbles in my brain. do others agree that these teasers and full cims are insanely incomprehensible at first glance; or if not, do you have any tips?
Bump
bump, curious as well
Just reps. You quickly learn to filter out the BS. Reality is over half the pages don’t matter
Well first of all it helps if you have SOME prior industry knowledge relating to the cim you're reading. And if not, it's still relatively simple. Put on your investor hat. What I mean by this is imagine you have large pool of private money and you're going through a cim to figure whether you should personally invest. When you start thinking this way, you become skeptical and identify things in the cim that are important to understand. If you still can't, then I encourage you to start off with the financial section where the main income statement/ cash flow lines are summarized. By looking at the financial statements, you will know what are the big ticket items / drivsrs to be focusing on initially and then you will go through the cim to see if the arguments presented there will cause these drivers to move favorably or adversely. As an example, you see an income statement where costs are stable with margins being driven by revenue growth, and within revenue growth, average sales price (not volume) driving growth. So now you want to understand what drove average sales price in the past and what/why will it hold true (or not) in future. This is not differnt from sat / gmat if you think about it - you first read the questions and then go back to the passage to see what info in the passage helps answer the question....hope that helps
Skim - take notes under different headings. Business model, industry, value chain, competitive landscape, differentiation/value prop, financials, cash flow items. Write down lists of questions.
Then read again more thoroughly - use ChatGPT or Google to basically ask - “What does a company like X do? How does it make money? Explain like I am five.”
Now to test what’s true and what’s BS - so some expert network calls (1-3).
By the end of that you’ll understand 80% - and it’ll be enough for the initial bid. Once you get to next round, between 1,000 hours in the data room, management calls, consultants, executives, site visits - you’ll get to 95%.
And then you’ll plug all that into your model and your Partner will tell you to increase revenue growth and gross margin by 3%/200bps to pay what your Partner wanted to pay on day 3 of the process.
80% of it is the numbers. Next 10% is the attractiveness of the market and their differentiation within that market.
Most of the other stuff is just fluff.
And BTW - you’re right that most CIMs are written incoherently.
With reading anything dense (not just a CIM, anything) it's been helpful to form an idea of what I expect to see before opening it. I read more actively that way. I do this especially with CIMs. For example I've read a lot of CIMs recently in specialty retail. I'll form a guess beforehand like "OK, regional sporting goods chain, I'm guessing they'll tout the gross margin upside because there's nothing else they can tout, I can't remember the last time I didn't just go to Amazon or a pro shop for sporting goods, I bet their SSS blows and they're going to be telling me about whitespace for new locations even as half their stores are ready to close down, maybe there's a bright spot about selling to kids because they need to try everything on." I'll just make up a story, often cynical, about the bullshit I'm about to read. Then every page speaks to that story instead of just sitting there.
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