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Top 5 Ways to Make PPM Drafting More Efficient, Less Costly

Top 5 Ways to Make PPM Drafting More Efficient, Less Costly

by / Saturday, 25 April 2015 / Published in Raising Capital, Regulation D

After 16 years, we have seen all manner of bottlenecks plague the private placement drafting process, resulting higher legal fees or missed opportunities. As a result, we have a strong understanding of what the process efficiency drivers are.  The following discusses some brief pointers in order to enhance efficiency, with a focus on the private placement memorandum, since it’s the heart of most offerings.

As discussed in detail in the article available at this link, the private placement memorandum is the core document for many companies that are raising capital , which is used to describe the investment security, the company, the offering itself, and the various risks associated with the investment.  Since these documents can often exceed thirty to sixty pages, including exhibits, having a game plan in drafting them can greatly increase the efficacy of the offering and decrease the time to market.

  1. Strong Organization and Preparation.

Having a detailed portrait of the company mission and funding goals is absolutely critical.  Approaching the process organically with a “see how it goes” mindset is a sure fire way to incur higher legal fees.  All private offering documents have a well-worn organizational framework.  And while no two offerings are the same, it is very common for the core documents to follow a similar track.  As a result, you will see that many a PPM have the following format: 1) Major Disclaimers; 2) Executive Summary; 3) Management Bios; 4) Business Plan; 5) Marketing Plan; 6) Competitive Analysis; 7) Risk Factor Disclosure; 8) Investor Qualifications; 9) Tax Considerations; 10) Confidentiality; 11) Investment Instructions.  Any business owner looking to raise capital should read third party PPM’s in his or her space to be conversant with this format and how other owners have approached marketing their opportunity. Granted, each third party PPM should be reviewed at arm’s length and not with a view to cut and paste.  However, doing so will provide a great deal of insight of what is expected on the part of the issuing company in terms of information and materials that it must furnish.

  1. Be Ready to Sell the Opportunity.

Remember that a PPM is really a business plan and marketing document efficiently couched in legal disclosure.  So at its heart it’s still a “sales” document. What this means is that a business owners should be able to relay to a prospective investor in an effectively detailed fashion, what the business does, where it stand sin the overall marketplace, its particular competitive advantages and why this particular capital raise is a unique opportunity.    Without fail the best PPM’s that this office products are based on well-developed business plans that do all of the above.

  1. Who are Your Investors?

Knowing your target investor pool will help your attorney understand which of the Federal securities exemptions are available for your offering.  In addition, if you know in advance that some of your investors are out of state, be sure to share that information with your lawyer as early as possible.  Each state has its own set of Blue Sky Laws (i.e. individual state securities laws), and you must follow the state securities laws of the individual investor.  Advise your attorney of your investor pool early, and it may save you from a hiccup or delay further along in the process.

  1. Leverage Your Professional Network.

Be prepared to interface and regularly consult with a team of professionals.  Conducting an offering is a matter that necessarily involves legal counsel, tax advisors, marketing, and branding people, and of course management.  All parties should have regular and unfettered access to each other in order to minimize any possibility that one party is not aware of any issues that might complicate that party’s job.

  1. Be Prepared to Have Real Deal Terms.

Often clients, even if they have a good sense of their opportunity, fail to have decent a sense of what deal terms will make sense for their operations, their investors, and their future investors.  This can protract the offering process and have adverse long term repercussions.  There are a variety of parameters that drive any private capital raise, above and beyond describing the opportunity itself.  These can also impact the success and viability of an offering. For example, should a company pursue a debt or equity offering?  What class of equity (preferred, convertible, etc.) should be offered?  Should there be management rights, audit rights, etc. offered? If the company issues debt, should that debt be convertible, senior, secured, etc.?  Having an understanding of what and how these terms are relative to your industry can greatly assist legal counsel in streamlining the process.  In short, don’t engage counsel without having at least a sense of what your industry is offering to potential investors.


Engaging in a private placement offering is a significant undertaking.  However, planning and preparation can greatly decrease the burden and ultimately costs that a business owner may face.  And from our own experience, in nearly every case where the issuer is more prepared, the investors are more eager to provide capital.


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