Making the Case

Whatever a company’s financing needs may be, it is crucial to present the case for why a lender should lend, or an investor should invest, in a clear and compelling way. If an aggressive business growth plan makes sense, its risks and benefits should be enumerated clearly to leave little doubt of its success. Similarly, the synergies of a strategic acquisition need to be understood so that funding sources understand how they will be repaid. Management buyouts often involve extraordinary leverage, so an especially strong case must be made for how all layers of money will be repaid at acceptable returns. If the business’s track record of success has some interruption, then the non-recurring nature of the problems – as well as their remedies - should be presented and clarified upfront. Don’t leave any issues for the money sources to discover on their own, because they will! Instead, lay them out and make it clear how problems have been addressed and why they will not recur.

The Private Placement Memorandum (“PPM”) is the key document used to solicit a lender's or investor’s interest and in creating competition among prospective funding sources. The purpose of the PPM is to explain the nature of the business, the company’s position in its industry, the purpose of the financing and why it’s a good deal for the money source. Lenders must be shown how the business will be able to generate sufficient cash flow to repay their loans. They must also be shown how they will be protected if things go wrong. If the request is for investment capital, then the prospective investors must be shown how they can expect a good return on their investment at a reasonable risk.

All Private Placement Memorandums prepared by L. R. Nathan Associates are written from “scratch” in order to present each client’s unique case in the most compelling and persuasive matter. The PPM does not sell with flowery exaggerations, but rather with a straight forward presentation of facts, solutions to problems and convincing reasons for money sources to say “yes”. A well-done PPM does not avoid difficult issues – it raises them, along with their resolutions. An effective PPM should leave the reader with few unanswered questions about key issues affecting their decision to lend or invest.

The following are two sample Private Placement Memorandums from actual closed transactions. The names and locations of the clients have been changed to protect client confidentiality.