Best way to read a CIM?

I am no expert and have limited experience, but I would guess that given the limited time you are looking for things to help you determine whether you want to do more research or not.

So, I would look at:

*industry growth/trends to see if there is tail/headwind

*the company's growth (at a high level) so see how its doing against its competitor and industry

*company's strengths and weaknesses

*from the above, you want to be able to see what the entry price is going to be and how much you will be able to exit at.

E.g.If a company has many weaknesses, but potential to become a leader, you can buy at lower than avg. multiple and exit at the high end.

I would personally skim through the CIM looking for these (^) things so I can have a productive discussion.

Focus on whether or not the opportunity properly tracks the PE fund’s investment criteria and philosophy.

Do you have depth in one particular topic that you can focus on? If so that will make you look smart; "the distribution strategy doesn't address these key factors". Or, something obscure like "their lender was just acquired which puts their lending relationship at risk and I'm not sure management is properly addressing that risk".

If you are buying a steady cashew business, start at the financials and be cynical on the (bullshit) hockey stick growth projection that every Ibanker puts in the CIM. Basically poke holes in the glorious #s. If you are buying deep value, start with the story and see if it holds up, the numbers already suck what can you do to make them better?

I would read lots of CIMS between now and then so you can very quickly separate the wheat from chaff. They all have plenty of noise around the important stuff.

Back to front... I always like to begin with the financials before being “clouded” by all the marketing at the beginning of the deck.

WSO - How to analyze a CIM

flip to the back look at financials in the appendix first

Read TOC first, then executive summary, then financials. The whole middle part is read only in case of sincere interest.

I'll take a stab - I'm not very tenured (~1.5yrs in PE), but this is what I do: 1. Value Proposition - I spend some time really understanding the product or service the company provides and why it is valuable to the customer. Why do they use it? What would happen if they didn't? What are the substitutes? (Basically max $ per customer opportunity) 2. TAM / Market Drivers - I then look at how big the market is -> # of customers x number of annual payments x ASP or something of the like. Then I go into market drivers - what are the main activity drivers of the industry (example: buying new wood for decks is new housing starts, deck replacements, etc). I want to understand how these drivers are trending and how this will affect the market going forward. 3. Competition / Market Share dynamics -> I then want to understand the target market share/what are the competitors and what are the varying value props. Maybe I segment the market. Basically, I'm trying to understand how market share will trend going forward 4. ASP/Cost Structure -> Margins -> Next I look at the industry structure, competitive dynamics, which help me understand ASP and relative operational effectiveness (vs competitors) to help me understand cost structure (example could be logistics components of a value chain) to have a top down perspective on margin. Then you can look at the company's actual margins to see if I'm right (and get some questions / perspective). 5. Merits and Risks - I spend some time thinking about what are the merits and risks of the target. Suppliers, Customer concentration, management teams, trends, etc. Collate all these into a pros and cons list. Also do some thinking on company history/old acquisitions and what they added, etc. 6. Comps - if possible, I like to look at transaction comps and public trading comps to see what similar companies trade at 7. Financial metrics/projections - finally (after the qualitative diligence -> so I'm not biased by the #s when thinking) I take a deep dive into the financials, looking at metrics such as incremental profit margins, asset base, ROIC, cash flows, and historical revenue & margin stability to better understand how the business may perform going forward. I then build a simple model aggregating all of the above analysis with simple assumptions (revenue growth by segment, margin expansion by segment, multiple expansion (which is not preferred), capital structure (adjusted for volatility of free cash flows), and see what the returns could look like. I usually look at unlevered IRR and levered IRR. 8. Summary: finally I summarize all this information into a simple deck that includes an executive summary (quick overview, what we should do: thesis, returns, EBITDA, purchase price multiple, and capital structure), a merits slide highlighting all the good things, a risks slide highlighting all that could go wrong, and a "What Really Matters" slide that suggests what we should diligence further if we were to commit more time and $ resources to testing this thesis.

if you only have an hour, my strategy would be to flip straight to the financial section to try and get a sense of the quality of the business.

Then once you are familiar with the financial profile, try to figure out the drivers of the key figures base on materials in the CIM. Can look for positives or negatives...but the intention should ultimately lead to a thesis and risks summary, and then a recommendation thereafter

The point is to not get the right answer, but to take what's given to you and form a investment proposal backed up by available data. If you are qualified for the gig, you should be able to extract the key information and make a recommendation that is at least half accurate, if not more.