Into large bowl, measure cereal then set aside.

In small microwaveable bowl, microwave chips and butter uncovered on High 1 minute.  Stir then microwave about 30 seconds longer or until mixture can be stirred smooth. Stir in vanilla. Pour mixture over cereal, stirring until evenly coated. Pour into 2-gallon resealable food storage plastic bag.

Add powdered sugar; seal bag. Shake until well-coated. Spread on waxed paper to cool.

Add in M&Ms and stir.  Store in airtight container.