CIM Outsourcing for Firms Driving Faster Deal Execution

CIM Outsourcing for Firms Driving Faster Deal Execution

CIM Outsourcing has evolved from a tactical support role into a strategic function. CIMs remain the foundation for fundraising, M&A, and deal marketing in private equity and venture capital. However, due to the amount of analyst time involved with creating CIMs in-house as well as the amount of time and management attention spent on creating these materials, deal volume levels have jumped back. Activity timelines have shortened for many investment management firms. There has subsequently been a rising trend towards using an external CIM Outsourcing provider to fulfil these functions. It allows the firm’s investment professionals to focus on what they do best. This helps in enabling the firm to use its limited resources better.

According to the 2024 Deloitte Private Markets Outlook report, more than half (58%) of mid-market investment management firms intend to increase their use of third-party providers to create programs to enhance the efficiency and reliability of their respective processes.

CIM Outsourcing in Modern Investment Workflows

It enables investment firms to delegate many aspects of CIM preparation to an outsourced firm. It helps in maintaining ultimate strategic oversight over these projects. Since 2021, the length of the Due Diligence timeline has increased by an average of 22%. Thus creating a need for most firms to outsource their CIM preparation to third-party specialists. CIM preparation is a time and labour-intensive process that falls outside the core competencies of the firm.

CIM Outsourcing in Modern Investment Workflows

CIM Outsourcing in Modern Investment Workflows

What does CIM Outsourcing Cover?

Outsourcing providers handle all aspects of CIM preparation, including financial models, market sizing and positioning, competitive analysis, and risk management. Providers often provide standardised formats for CIM preparation to facilitate consistency across multiple deals. Thereby providing a means of driving consistency across a portfolio of investment deals. Providers can also reduce the internal review cycles of most firms by an average of 30%.

Why Firms Are Reallocating CIM Work?

By outsourcing their firm’s CIM preparation, analysts can spend more time sourcing, placing valuations, and conducting negotiations. This allows firms to reduce analyst burnout, improve their workflow, and align their workflow with the trend of outsourcing. It can be done for all non-core document-intensive operations.

CIM Outsourcing as a Strategic Operating Model

It has evolved from being merely a way to augment capacity for firms into a strategic choice. Firms can make to increase Agility, Consistency, and Excellence in Execution. McKinsey & Company estimates that by the year 2026, more than 60 % of Investment Firms will have outsourced at least one of their Core Deal Support Functions. Outsourcing is at the heart of this transformation, allowing Firms to place their full attention on What Drives their Returns and to communicate clearly and credibly with Investors while providing them with compelling information.

CIM Outsourcing and Its Role in Fundraising Efficiency

CIM’s role as an outsourced service has a significant impact on the success of the fundraising process. Especially when it comes to sourcing capital for current and future projects within a crowded environment and differentiating yourself from other firms.

MSCI’s Capital Markets Outlook, published, when referring to “quality of investment documentation,” over 70% of institutional investor respondents stated that this attribute is one they use to influence their decisions to initially engage with early-stage investment opportunities. As such, leveraging a CIM that is professionally structured will positively impact the initial impression received in relation to your CIM and your firm and reduce the amount of back-and-forth discussion with respect to diligence processes.

Enhancing Investor Communication

Outsourced CIM teams are comprised of specialists who can translate complex operational or financial data. It is done into easily understood and professionally coherent investment narratives. Given the increased need for consistent communication concerning growth strategy development/implementation, scalability, and downside protection throughout the capital-raising process, the function of outsourced CIM teams is important.

In addition, for private equity and other alternative investment firms that are raising capital for multiple funds. They are having consistency in terms of CIM development will assist with your brand credibility. This is especially true when combined with the limited attention spans of the average investor and the large volume of deal flow in the marketplace.

Supporting Capital Raising Timelines

The companies that are actively raising funds usually must function under tight schedules based on market conditions or the need for liquidity from the portfolios. CIM Outsourcing allows for faster iterations and concurrent processing to stay updated on the information despite changes in assumptions.

According to Deloitte, companies that make use of outsourced documentation support can decrease the time taken to prepare for fundraising by as much as 18 to 25 percent.

Operational and Cost Benefits of CIM Outsourcing

CIM Outsourcing isn’t just about speed and quality; it’s also about quantifiable savings & improved efficiencies. Due to the need for senior management oversight and multiple rounds of editing and a high opportunity cost associated with using internal documentation teams. According to a 2024 operational benchmarking report on operations by CBRE, the cost of each transaction operated via an outsourced method has been reduced by 20% to 30% versus fully in-house methods.

Scalability Without Fixed Overhead

When firms use outsourcing, they can increase their documentation capability according to the number of transactions being processed. During times of cyclical growth, the ability to increase or decrease documentation resources will provide more flexibility for internal teams to manage peak work periods.

Accuracy and Risk Mitigation

CIM Outsourcing Companies provide numerous layers of review to ensure that they have reduced the likelihood of human error and inconsistencies. The efforts to produce quality work will help to mitigate risk to the firm’s reputation as well as increase investor confidence in the documents produced during the due diligence process.

How Firms Select the Right CIM Outsourcing Partner

When selecting the right partner for CIM outsourcing, cost is only one part of the equation. As such, leading businesses place a higher value on domain experience, the maturity of processes, and collaborative styles utilized by their outsourcing partners.

How Firms Select the Right CIM Outsourcing Partner

How Firms Select the Right CIM Outsourcing Partner

Domain Knowledge and Financial Fluency

To create an effective CIM that resonates with sophisticated investors, providers must be able to speak the specific metric types, valuation logic, and regulatory expectations of the companies in the sector they’re working with.

Process Transparency and Collaboration

For firms to gain maximum value from their outsourced partner’s experience, providers must operate with a level of transparency. It is through the use of clear workflows, version control and communication protocols. The provider should seamlessly integrate into the firm’s internal teams and existing operational structure.  These integrations provide a more efficient operation of both the outsourcing firm and the provider’s services.

Technology Enablement

Developing advanced solutions and utilizing rapidly developing technologies, including artificial intelligence, data validation, and secure collaboration tools, allows providers to enhance their ability to reduce turnaround time and ensure that your confidential information remains protected.

How Magistral Consulting Adds Value Through CIM Outsourcing

At Magistral Consulting, outsourcing is provided within the context of an overall investment support infrastructure. It is not just as an isolated offering. Magistral Consulting provides investment companies with the expertise and support needed for them to execute an investment with confidence.

There is significant experience in private markets for both teams of Magistral. They support CIM creation in a highly integrated manner with the valuation models, findings, and expectations of the investors.

In carrying out its role as an extension of the client teams, Magistral allows the investment firms to focus on strategy and capital allocation. It is by ensuring that the CIMs are investor-ready, data-driven, and executed at a professional level by being agile. Magistral also ensures that they are credible in a highly competitive deal environment.

 

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact


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