How Do I Check a CIM for Unsupported Claims Before Sending It to Buyers?

Start with a claim register, not a general read-through

A polished CIM can make unsupported language difficult to notice. Begin by converting the draft into a claim register. Capture each concrete assertion, its location, claim type, source record, period, definition, reviewer, and status. Include numbers and nonnumeric claims such as “recurring,” “defensible,” “low customer concentration,” or “fully staffed.” A sentence can be unsupported even when every individual word sounds reasonable.

Separate factual claims from interpretation and forward-looking statements. “Revenue was $X in the year ended Y” is a historical claim. “The business can sustain this growth” is an interpretation or forecast that needs a stated basis and assumptions. The register should make those categories visible so a reviewer does not approve a prediction as if it were an accounting fact.

Assign the right source of truth to each claim

Use the record that is closest to the claim. Historical revenue and expense figures may tie to approved financial statements, trial balances, general-ledger exports, tax returns, or management accounts, depending on the transaction and accounting process. Customer concentration may require a customer-level revenue report and a defined measurement period. Contract duration requires the relevant executed agreements, not a sales summary. A marketing page or prior presentation can help locate a claim, but it is not automatically evidence for it.

For every source, record the document name or system report, version or date, period covered, currency and unit, and the relevant page, tab, or field. Preserve the source’s original definition. “Customers” might mean billed accounts, active accounts, parent companies, or locations. “Recurring revenue” might exclude implementation fees or include a contract that can be cancelled immediately. If the definition is unclear, stop the claim review until the owner and qualified advisers choose and document a defensible basis.

The PCAOB’s evidence standard is written for audits, not CIM preparation, but it gives a useful discipline: evidence should be relevant and reliable, and company-produced information should be checked for accuracy, completeness, and sufficient detail. Original records and independent sources generally deserve more weight than an internally repeated statement. [2]

Reconcile the financial story to the statements

Build a simple bridge from the CIM’s headline financial claims to the underlying statements. Check that revenue, gross profit, operating expenses, EBITDA, cash, debt, and working-capital references use the same period and accounting basis. Recalculate percentages from the stated numerator and denominator. Confirm that the displayed unit is consistent, such as dollars versus thousands, and that fiscal years are not being compared with calendar years without explanation.

The review should cover both totals and direction. A growth statement may be arithmetically correct but still misleading if one period includes an acquisition, a discontinued product, a partial year, or a change in revenue recognition. Margin expansion may reflect a reclassification rather than an operating improvement. If the CIM uses LTM results, state the component quarters and cutoff date. Do not replace an unresolved mismatch with a rounded number or an informal explanation. Record the mismatch, investigate it, and require a human decision on whether the claim is corrected, qualified, or removed.

Treat adjusted metrics as formulas that need receipts

A label such as Adjusted EBITDA does not establish a universal calculation. List every adjustment, its amount, period, reason, and source. Reperform the bridge from the reported starting measure to the adjusted result. Check whether an adjustment is recurring, cash or noncash, operational or unusual, and already reflected elsewhere. If the same cost is removed from more than one metric, investigate the possibility of double counting.

SEC staff guidance says non-GAAP measures should be reconciled to the most directly comparable GAAP measure. It also notes that measures such as free cash flow do not have a uniform definition and require a clear description of the calculation and reconciliation. The practical implication for a private-company CIM is to show the definition and bridge close to the claim, not rely on a familiar label. [1]

Check prominence as well as arithmetic. A buyer should be able to see the reported measure and understand how the adjusted measure was derived. If an adjustment depends on management judgment, identify the judgment and supporting record. If the calculation cannot be reproduced from the available evidence, do not present it as a verified historical fact.

Test operating claims with the same rigor

Operating claims often carry more persuasive force than a table of figures, so they need defined tests. For customer claims, compare the named category with the customer master, revenue by customer, contract status, and the selected period. For retention claims, define the cohort, start date, cancellation treatment, expansion treatment, and whether the measure is logo retention, dollar retention, or another metric. For market claims, retain the source, geography, date, and definition of the market boundary.

For people and operations claims, verify headcount, roles, contractor status, key-person dependencies, licenses, facilities, and material supplier arrangements against current records. Words such as “proprietary,” “exclusive,” “recurring,” “stable,” and “scalable” should trigger a request for the contract, policy, process record, or other evidence that makes the description precise. A claim may be retained as management’s view, but it should not be written as an objective fact when the supporting record is missing.

Review liabilities, exclusions, and negative space

Unsupported claims are not limited to inflated positives. A CIM can mislead through omissions or narrow definitions. Compare the narrative with debt schedules, leases, taxes, litigation or dispute records, change-of-control provisions, commitments, related-party transactions, customer credits, warranty obligations, and unusual working-capital items. Confirm that “debt-free,” “no litigation,” or “no customer concentration” is not being used when the underlying definition excludes relevant obligations or exposures.

Use an exceptions log with four outcomes: supported, supported with qualification, unresolved, or removed. For each unresolved item, identify the owner, next evidence request, due date, and stopping condition. A sensible stopping condition is that the document cannot be approved for buyer distribution while a claim that could materially change the reader’s understanding remains unresolved. The owner can then decide, with qualified advisers, whether to correct the claim, add a qualification, or defer distribution.

Apply a reasonable-reader and approval review

After the claim tests, read the CIM as a buyer would. Ask which statements could change a reasonable reader’s view of earnings quality, durability, concentration, liabilities, competitive position, or transaction readiness. Review quantitative and qualitative context together. A small numerical error in a central claim may matter more than a larger error in an immaterial detail, while a technically true statement can still create a misleading impression when an important limitation is omitted.

SEC staff materiality guidance describes an objective, holistic review from the reasonable investor’s perspective and says materiality is not a mechanical exercise based only on size. It also treats financial statements as a starting point and non-GAAP analysis as additional, not a substitute. The guidance is staff guidance, not a rule that governs every private sale, so apply it as a review discipline rather than as individual legal advice. [3]

Set an explicit approval chain. The business owner or designated transaction lead approves factual release only after each material exception is resolved. The accountant or other qualified financial adviser reviews accounting-sensitive reconciliations. Counsel reviews legal descriptions, confidentiality, contracts, regulatory statements, and jurisdiction-specific issues as appropriate. No software workflow should silently approve, disclose, negotiate, or contact buyers on a person’s behalf.

Use software and AI as controlled review support

Software can help a human locate repeated claims, compare numbers, attach source references, and route exceptions. A practical pilot is narrow: select one section, define the source-of-truth folder, give the reviewer only the permissions needed, and test whether the process identifies known discrepancies. The accountable human reviewer remains responsible for deciding whether a claim is supported. AI output should be treated as a draft finding, not evidence or approval.

Set stopping criteria before the pilot. Stop and escalate if the tool invents a source, merges different periods, changes a definition, exposes confidential information, produces an untraceable calculation, or misses a known test case. Choose confidentiality settings and retention choices that fit the records and obtain the owner’s approval before uploading sensitive material. Keep human review for every material correction, source substitution, disclosure choice, and final release decision.

Create a release packet that can be revisited

Before sending the CIM, retain the approved version, claim register, exceptions log, source list, financial bridges, adjustment schedules, reviewer comments, and approval record. Record the date and version of each item. If a source changes, reopen dependent claims instead of editing only the visible sentence. A later buyer question should be answerable by returning to the same evidence trail.

Acquivo gives business owners the entire sell-side process an investment bank would run, as software, with no success fee. It is user-operated software, so the owner and chosen advisers remain responsible for evidence decisions, permissions, human review, and approval. Acquivo is a software platform that delivers the entire sell-side M&A process, valuation, marketing materials, buyer matching, and deal management, on one platform for business owners, M&A attorneys, and boutique investment banks. [2]

The goal is not to make a CIM sound cautious. It is to make each important statement traceable, defined, reconciled, and approved. When evidence is missing, the professional choice is to qualify or remove the claim before distribution.