Investment Memorandum Private Equity
Let our staff help write and develop your investment memorandum private equity. The need to write a investment private placement memorandum for a private equity offering is needed to attract investors or a syndicate of investors as they will certainly analyze your investment memorandum when soliciting private equity money. The investment ppm memorandum will detail the structure of the deal, the terms of the partnership and of course pay out via performance or otherwise as agreed upon.
Our team at PPM.net can assist with your private equity fund for a private placement memorandum. Private equity funds often raise capital in the private placement arena and the main disclosure document used when approaching investors is the private placement memorandum. Private equity funds are created for real estate projects and many other investment structures. The PPM – private placement memorandum – will outline the terms of the private equity fund.
Our firm has been involved in private placement equity fund offerings for over 20 years and our attorneys and consultants have written more than 5,000 private offering documents. If your company is considering raising capital for your company and need a private equity funds private placement memorandum for investment purposes reach out to us any time.
What is an Investment Memorandum?
The simple answer is that a investment memorandum, or also called private placement memorandum or PPM is a disclosure document used to raise private capital. Often investors will require a PPM in order to consider an investment in one’s company. A private placement offering memorandum, which is also known an a “PPM” for short, showcases the offering terms. The terms of a PPM offering include the price of the shares, or bonds or notes, as well as relevant risk factors, and the company’s strategy among many other requirements. Private placement memorandums are used for what is known as a private placements, or selling private securities in lieu of an initial public offering or IPO. Various types of investors put capital in a private placement, including accredited investors, non accredited investors, hedge funds, private equity, venture capital and angels and many more groups. For companies raising money worldwide, the PPM private placement memorandum is one of the most utilized documents.
Various Styles of Private Placement Memorandums
There are many varying styles of Private Placement Memorandums. Whether one structures the PPM for a debt or equity offering will also determine the formalities of the document. Let us examine the two most common private placement offerings often created and utilized globally.
- Equity Private Offering: An equity private placements is when a company sells shares or units or other percentage of ownership. The selling of shares for corporations or units for LLC’s are probably the most popular forms of private placements. In addition to the stock offered, many companies will propose convertible securities like convertible preferred shares, or propose to sell preferred shares which usually is a ‘better’ form of equity than standard common stock.
- Debt Private Offering: Selling debt securities is when a company essentially takes on a loan. The investor will typically receive a note. This is also the case for a bond offering. Both note and bond offerings utilize a private placement memorandum. The PPM will highlight the terms of the debt, such as the interest rate, payment terms, and the maturity date among other features. Another popular method of raise debt capital is offering convertible notes or bonds. This debt converts to equity at a certain point in the company’s business, which is usually pre-determined.
- Rules & Regulations for Private Placements: Within the debt and equity private placement space there are a plethora of rules and regulations. Some of these rules regulate the US investor market, while others will govern international investment in US corporations. Rules such as 506 or 506b and 506c, 504 and 505, all under Reg D or Regulation D, are popular ways to raise capital. In addition to Regulation D there is also Regulation A (Reg A) which is an exemption from the registration process for public companies More common – at least from the PPM.net prospective – is Rule 144A and Regulation S (Reg S). Both 144A and Reg S are common for companies raising debt capital, though they are also used for equity private placements.
Regardless of the rules or regulations you may require, our team at PPM.net can assist with the writing of the private placement memorandum, and help structure your terms.
Private Placement Memorandum Characteristics and Structure
Since private placement memoranda are used for raising private money it is important to tailor the PPM. Below are a several features of the private placement document:
- Executive Summary: the executive summary is typically a short synopsis of the business and its strategy. We at PPM.net prefer to include an executive summary in the private placement memorandum.
- Jurisdictional Legends: Jurisdictional Legends are placed in the PPM to show specific rules when raising capital, often state by state as well as country specific regulations. International investment in US or foreign companies will also need Jurisdictional Legends based on the country of domicile.
- Terms of the Offering: the terms of the offering will detail the what the company is selling for the capital. This includes the price for the shares or notes/bonds, requirements for subscription and other details. For debt securities the terms will outline the maturity and interest rate and other bond and note features. Having a solid term sheet is important for the private placement memorandum to convey its overall message.
- Investor Suitability: the investor suitability section of a PPM will deal with investor standards.
- Risk Factors: having solid and detailed risk factors regarding the potential pitfalls of the business is crucial. .
- Management Team: in this section of the PPM the company’s team is highlighted, including the CEO or director.
- Use of Proceeds: a use of proceeds is just what it sounds like; you would detail where the capital received from investors would be allocated.
- Tax Implications: tax implications are also noted in the PPM and will detail the tax ramifications, whether, state, federal and if a non-US company, internationally.
- Subscription Agreement: the subscription agreement is similar to a contract between the company and the investor. PPM.net assists often with just subscription agreement documents, but most private placement memorandums that we assist with also have a detailed subscription agreement.
- Exhibits: Exhibits are also part of private placement offerings, and typically placed in the latter section of the PPM.
In Summary
Drafting a a an investment memorandum for private equity geared toward raising capital can go a long way, both for the entrepreneur and the investor. With all of its details, the PPM will give a clear picture of what the company is proposing, while offering many details about the tax implications, risk factors and other characteristics. In addition, the terms of the offering, the management team and use of proceeds and other features will give the entrepreneur precise information to convey to their prospective investors when raising capital.
Reach out to our staff at PPM.net any for a free consultation for a PPM for an investment memorandum.