PPM (private placement memorandum)
Also called Offering memorandum, Private offering memorandum.
A PPM, private placement memorandum, is the disclosure document a fund gives prospective investors in a private offering, describing the strategy, the team, a summary of the terms in the LPA, prior performance, conflicts of interest, tax considerations and risk factors. It is a disclosure document, not the contract.
Example
A first-time manager raising a $50M fund produces a PPM of around sixty pages. The summary of terms gives the 2% fee, 20% carry and ten-year term that the LPA sets out in full. The track-record section shows the partners' prior deals with gross and net figures and a footnote on how each was calculated. Fifteen pages of risk factors cover illiquidity, concentration, key person loss and valuation uncertainty. The conflicts section discloses the GP's other vehicles and how co-investments are allocated. The tax section flags UBTI for tax-exempt LPs and effectively connected income for non-US LPs. Each subscriber signs an acknowledgement that they received it.
Confused with
LPA. The LPA is the contract. The PPM summarises it and adds disclosure; if the two conflict, the LPA governs.
Pitch deck. The deck is marketing. The PPM is the document counsel relies on if an investor later claims they were not told something.
In practice
Regulation D does not require a PPM when every investor is accredited, but the anti-fraud provisions of the securities laws apply to every statement a fund makes, which is why counsel insists on one. Drafting it is an organisational expense, usually subject to a cap in the LPA.
Sources
- Rule 502, Regulation D general conditions, including the information requirementwww.ecfr.gov/current/title-17/chapter-II/part-230/subject-group-ECFR6e651a4c86c0795/section-230.502