• Below you will find general datarooms to be retrofitted for you use. If you would like help in assembling these documents, contact support@raises.com

• Below you will also find questions and a list of all the items you need to create all the necessary documents for a capital raise. Let us know what you have, and for the ones you do not have, we can create a template of it to get things started.

• If you have not already, prepare your deals’ dataroom so that you can be ready to raise the capital using General Dataroom (Click Here)

• Take the templates required, fill in the documents you have, and ask us about the documents you need.

• Click HERE to get access to the Information Exchange Cheatsheet which explains the most important metrics to track during the lower middle market information exchange process.

• Click HERE to get access to the Turn-Key Dataroom which outlines lower middle market capital raising processes with real documents to assist in dataroom building (pitch deck, to subscription agreements).

Quick Links:

• Example of General Dataroom

• Example of Real-Estate Dataroom

• Example of Infrastructure/Energy Dataroom

• Example of Investment Bank Deal Memo

What you need:

• Dataroom
  • A. Corporate and Organizational Profile/ Share Structure
  • B. Securities (Subscription Agreement and PPM)
    • For Subscription Agreement and PPM:
    • Questions needed to be answered (includes the above):
    • Brokered or Non-Brokered Private placement?
    • Will you go public?
    • EXEMPTION?
      • US
      • Regulation D
      • 506(b) or  506(c)
      • Regulation A/A+
      • Regulation S
      • Regulation CF
      • Other countries:
        • Canada
        • US
        • Australia
        • UK
        • ETC.
      • INVESTMENT OPPORTUNITY HIGHLIGHTS?
      • INVESTMENT STRATEGY (Overview and target assets)?
      • SUMMARY OF KEY TERMS?
      • PERFORMANCE HISTORY?
      • INVESTMENT OPPORTUNITY AND MARKET ENVIRONMENT?
      • TARGETED PORTFOLIO COMPOSITION?
      • INVESTMENT PROCESS?
      • RISK FACTORS AND CONFLICTS OF INTEREST?
      • TAX CONSIDERATIONS?
  • C. Financing Documents
  • D. Financial Statements and Projections
  • Optional:
    • E. Customers
    • F. Tax
    • G. Employee and Director Issues
    • H. Properties Leases and Insurance
    • I. Contracts and Arrangements
    • J. Litigation and Environmental Issues
    • K. Receivables
    • L. Inventories
    • M. Transactions with Officers
    • N. Licenses and Intellectual Property
    • O. Misc.

If you’re buying businesses via M&A:

1. Origination and Legitimacy

a) Origination

You simply have to have a high volume of traffic from company owners that you are prospecting and talking to (let us know if you want an assistant to do this for you). As you’re aware, you could either approach sellers through brokers. You may also find sellers of communication companies through investment banks, consultants or directly.

It would be great if you would be able to also source transactions without using a broker. It would be relatively easy to source deals through some of the online groups (Raises.com groups instance) or by connecting with a few investment banks in our network. You can avoid some of the slowdown from traditional brokers. Traditional brokers are fine, however they may be slow to give you the information.

An example message you can send in the groups is:

Hi all, I’m reaching out to my network as a call to originate certain projects in [you sector] companies seeking financing. We don’t charge upfront fees because we’re the ones deploying the capital and making control acquisitions. Please see the criteria below and email them to [your email]. Feel free to inquire about us as needed as well.
[your acquisition criteria]

b) Legitimacy

Letters of commitment:
For legitimacy, many ask for letters of commitment or proof of funds because there are many people who are new to acquisitions who may be a burden on the seller’s or broker’s time because they don’t know how to raise money. We’ve found through our letters of commitments it has helped dozens get through some broker and seller scrutiny. Yes draft terms sheets from lenders also help. Ultimately it is confidence that can also help you through this.

Online presence
Additionally, we can get a press release out as well on a reputable website, and setting up the website will help for sure. Phone number is recommended, but just a simple Google Voice or Zoom number would do. Close.com would be better for your serious outreach later on so you can track everything with an assistant under you. For the website are assistants will send a simple landing page with the following information (the brackets are parts to be potentially fill in)

• About Us

• The Enterprise seeks to make control investments and acquisitions in small and medium-sized businesses with a focus on these industries:

  • [INSERT ANY OTHER INDUSTRIES OR SUB INDUSTRIES HERE]

• We are not a broker, we are a principal buyer.

• We seek to fund and close transactions within 30-90 days after entering a Letter Of Intent. We aim to work with your company’s management team to improve performance and efficiencies whilst ensuring robust compliance frameworks are in place.

• Acquisition Criteria

• Our target companies generally meet the following criteria:

  • Revenues of $1m-$5m
  • At least $1m of Cash Flow
  • Principal operations in [AREA YOU WANT THE DEAL IN]
  • In business at least five years, with a minimum of three years of prior financial statements

Business Owners
We help business owners retire. Are you selling your business? If your company fits our acquisition criteria, we would like to hear from you.

Building a board can also help.

In the Raises.com networking group, or others. We can introduce you to one person if you notify us when you’re ready for this.
Tell him/her how you found him and your plan.
Ideally, meet/her him in person.
Thank him for taking the time.
Tell him you’re looking at a few options for this role.
Ask him if he has questions for you.
Tell him you’re looking for someone who has transactional experience and ideally sector experience.
Compliment him about his background and show that you did your homework about him.
Ask him if there’s anything you should know that will help or go against you with trying to grow this project.
Ask him how he believes he can help this project and how his experience could be an asset.
Tell him you’ll get back to him at X date with an update on your decision.
Remember that you don’t have to get a board! You can learn how to do everything needed before an LOI on your own (financial analysis is mostly what is needed and understanding the businesses organizational chart)
When you decide on your board members, simply ask them to partake in 1 meeting a quarter and offer them a percentage of acquisitions and profit that would be fair. With no cash out of pocket, this is how you build a board/advisors.

Use our network!
At Raises.com/community

c) Process and etiquette

Process

Step 0: Create your acquisition criteria
Step 1: Book appointments with sellers of the target company that fits within that criteria either through networking with Raises.com members, or outbound messaging on Linkedin
Step 2: Get 1st call/meeting with the sellers to build rapport with them to sign an NDA
Step 3: After the NDA is signed, get the information in the due diligence summary
Step 4: Review all the information by having analysts and yourself substantiate and verify the information
Step 5: Submit offers via a letter of intent, ideally exclusive
Step 6: In the timeframe, raise the capital to close on the deal

Use our sample LOI and NDA in your Google Drive

Etiquette
Much of this boils down to framing and confidence.

Your business plan:
Example M&A Business Plan https://www.loom.com/share/8e22fa802ab94945b2b706ec4d8a59bb

Investment Company Act:

To summarise the differences between the 3(c)1, 3(c)7, and 3(c)5 exemptions:

3(c)1 – This exemption does not limit the type of investors, but restricts the number of investors to 99. There are no restrictions on the kind of investment the fund can pursue.

3(c)7 – This exemption places restrictions on the type of investors but does not strictly limit the number of investors (up to 1,999, which can be considered nearly unlimited). Like the 3(c)1, there are no restrictions on the investment type.

3(c)5 – Unlike the previous two, this exemption does not restrict the investor type or number. However, it regulates the asset class:

55% of the portfolio must be invested in qualified interests, which are primarily mortgages or liens on real estate.
25% of the portfolio must be in real estate related interests. The exact definition of this can be somewhat vague, so it’s generally recommended to stick to qualified interests unless advised otherwise by a lawyer.
20% of the portfolio can be allocated to an asset of your choice, providing some flexibility.
These numbers are minimums or maximums, and can be adjusted as long as they do not exceed their respective limits.

Qualified Clients and Qualified Purchasers:

A “Qualified Client” is a term from the Investment Advisers Act of 1940, referring to clients of investment advisors managing over $100 million in assets. These clients must either:

Have $2.2 million in investable assets
Have $1.1 million invested with that advisor
Be a “qualified purchaser”
Be an officer, director, or an employee who participates in the investment activities of the advisor
Many private investment funds use a “promote” structure, earning a portion of profits, and typically require their investors to be both accredited and qualified clients.

The term “Qualified Purchaser” is from the Investment Company Act of 1940. To be a Qualified Purchaser, an individual or entity must:

Own $5 million or more in investments if an individual or family-owned business
Be a trust sponsored by and managed by qualified purchasers
Own and invest at least $25 million in investments if an individual or entity
Be an entity, of which each beneficial owner is a qualified purchaser
Investments with this requirement often have higher minimum investments.

Subsequent legislations, such as Sarbanes-Oxley Act of 2002, Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and JOBS Act of 2012 have further shaped the investment regulatory landscape.

Examples of accredited investors:

1. The Subscriber hereby represents, warrants, acknowledges and agrees to and with the Issuer that the Subscriber: 
   1. is a U.S. Purchaser; 
   2. has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the transactions detailed in the subscription and it is able to bear the economic risk of loss arising from such transactions; 
   3. is acquiring the Common Shares for its own account, for investment purposes only and not with a view to any resale, distribution or other disposition of the Common Shares in violation of the United States securities laws and, in particular, it has no intention to distribute either directly or indirectly any of the Common Shares in the United States or to U.S. Persons; provided, however, that the Subscriber may sell or otherwise dispose of any of the Common Shares pursuant to registration thereof pursuant to the United States Securities Act of 1933, as amended (the “U.S. Securities Act“), and any applicable State securities laws or if an exemption from such registration requirements is available or registration is otherwise not required under this U.S. Securities Act; 
   4. is not acquiring the Common Shares as a result of any form of general solicitation or general advertising, as such terms are defined for purposes of Regulation D under the U.S. Securities Act, including without limitation any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over radio or television or other form of telecommunications, or published or broadcast by means of the Internet or any other form of electronic display, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; 
   5. understands the Common Shares have not been and will not be registered under the U.S. Securities Act or the securities laws of any state of the United States and that the sale contemplated hereby is being made in reliance on an exemption from such registration requirements provided by Section 4(a)(2) of the U.S. Securities Act and Rule 506 of Regulation D promulgated thereunder. 
   6. satisfies one or more of the categories indicated below (check appropriate box): 
      • Category 1: An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Common Shares offered, with total assets in excess of US $5,000,000; 
      • Category 2: A natural person whose individual net worth, or joint net worth with that person’s spouse, on the date of purchase exceeds US $1,000,000; 

Note: For purposes of calculating “net worth” under this paragraph: 

• The person’s primary residence shall not be included as an asset; 

• Indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and 

• Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability. 

• Category 3: A natural person who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of US $300,000 in each 
  

of those years and has a reasonable expectation of reaching the same income level in the current year; 

• Category 4: A bank as defined under Section (3)(a)(2) of the U.S. Securities Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934; an insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; an investment company registered under the United States Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of such Act; a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the United States Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if the plan has total assets in excess of US$5,000,000; an employee benefit plan within the meaning of the United States Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; 
• Category 5: A private business development company as defined in Section 202(a)(22) of the United States Investment Advisers Act of 1940; 
• Category 6: A director or executive officer of the Issuer; 
• Category 7 A trust that (a) has total assets in excess of US$5,000,000, (b) was not formed for the specific purpose of acquiring the Common Shares and (c) is directed in its purchases of securities by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of an investment in the Common Shares as described in SEC Rule 506(b)(2)(ii) under the U.S. Securities Act; or 
• Category 8 An entity in which all of the equity owners are accredited investors; and 

1. if an individual, is a resident of the state or other jurisdiction of its disclosed address set out in the Subscriber’s information on page 2 of its subscription; or if not an individual, has received and accepted the offer to acquire the Common Shares at the office of the Subscriber at the disclosed address set out in the Subscriber’s information on page 2, of its subscription.

US Blue Sky Laws:

In the US, if you focus on targeting investors in a certain state alone, you may be subject to blue sky laws on a state-by-state basis. This means your filing requirements and need for a PPM can vary.

In the absence of an exemption either for particular securities involved, or for a particular type of transaction, the offer and sale of securities in every state is subject to registration and other qualification requirements imposed by state Blue Sky Laws. Information on state registration requirements and exemptions generally can be found in Blue Sky Law Compliance in Securities Offerings and Securities and Transaction Exemptions under Blue Sky Laws. This chart presents an overview of registration requirements including applicable filing fees, and the type of exemptions generally available in each state.

4.The obligation to publish a prospectus set out in Article 3(1) shall not apply
to any of the following types of offers of securities to the public:
(a)an offer of securities addressed solely to qualified investors;
(b)an offer of securities addressed to fewer than 150 natural or legal
persons in the United Kingdom, other than qualified investors;
(c)an offer of securities whose denomination per unit amounts to at
least EUR 100 000;
(d)an offer of securities addressed to investors who acquire securities
for a total consideration of at least EUR 100 000 per investor, for
each separate offer;
(e)shares issued in substitution for shares of the same class already
issued, if the issuing of such new shares does not involve any increase
in the issued capital;
(f) subject to paragraph 6a, securities offered in connection with a
takeover by means of an exchange offer, provided that a document
is made available to the public in accordance with the arrangements
set out in Article 21(2), containing information describing the
transaction and its impact on the issuer;
(g) subject to paragraph 6b, securities offered, allotted or to be
allotted in connection with a merger or division, provided that a
document is made available to the public in accordance with the
arrangements set out in Article 21(2), containing information
describing the transaction and its impact on the issuer;
(h)dividends paid out to existing shareholders in the form of shares
of the same class as the shares in respect of which such dividends are
paid, provided that a document is made available containing
information on the number and nature of the shares and the reasons
for and details of the offer;
(i)securities offered, allotted or to be allotted to existing or former
directors or employees by their employer or by an affiliated
undertaking provided that a document is made available containing
information on the number and nature of the securities and the
reasons for and details of the offer or allotment;
(j)non-equity securities issued in a continuous or repeated manner by
a credit institution, where the total aggregated consideration in the
United Kingdom for the securities offered is less than EUR 75 000 000
per credit institution calculated over a period of 12 months, provided
that those securities:
(i)are not subordinated, convertible or exchangeable; and
(ii)do not give a right to subscribe for or acquire other types of
securities and are not linked to a derivative instrument.

See more at http://www.handbook.fca.org.uk/