Series 79: 10.4.4. Identifying, Screening, And Negotiating With Investors

10.4.4. Identifying, Screening, and Negotiating with Investors

At about the time the PPM is being prepared, the investment bank develops a marketing plan or target list of potential investors. Ideally, this list is specifically tailored to the type and size of the offering. For example, venture capital firms might be interested in an equity offering, while insurance companies are prime candidates for offerings of debt securities.

The identification of specific prospective investors helps streamline the marketing process, but this task is not merely helpful: it is actually necessary, because general solicitations are not allowed for most types of private placements. In addition, as we will see, the most common types of private placements are suitable only for certain kinds of investors. Suitability in general is discussed earlier, but in the context of private placements, suitability also means abiding by the SEC’s restrictions on who the securities can be sold to. Each type of private placement has its own suitability requirements (for example, there may be a cap on the number of non-accredited investors). Limiting sales efforts to investors already known or reasonably believed to be eligible saves time and aggrav