Once the company has decided to seek private equity, the first step will be the preparation of a detailed business plan or private placement memorandum ("PPM") that describes the Company's business and operations, summarizes its business strategy, describes the relevant market, includes financial statements and detailed financial projections.
• The due diligence review is essential to formulating a valuation by potential investors. It involves verifying the assets, liabilities and contractual obligations (including any existing or potential contingent liabilities) and financial condition of the company.
Typically, after a potential investor has performed due diligence and has indicated a serious interest in making an investment, the parties will want to negotiate a term sheet or equivalent letter of intent which sets forth, in detail, the principal terms and conditions on which the investment will be made.
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