The order of documents
Materials are released in stages, as the investor's interest grows and confidentiality obligations get stronger. A typical sequence looks like this:
- Teaser: a short anonymous or named summary, sent before any NDA.
- NDA: a confidentiality agreement signed before detailed information is shared.
- Investment memorandum and financial model: the full description of the business and the numbers.
- Management presentation and site visits.
- Data room access and due diligence by the investor and its advisers.
- Term sheet, then the binding round documents: SPA and SHA.
Teaser and investment memorandum
The teaser fits on one or two pages: what the company does, the market, a few headline numbers, the purpose of the round and the IPO plan. It should not contain information that would harm the company if it reached a competitor. The investment memorandum is the main selling document of the round. It covers the business model, market and competition, strategy, management, historical financials, the use of proceeds, the corporate structure and the route to the IPO, including the target exchange and a realistic timetable.
The memorandum should be written with the future prospectus in mind. Statements about market share, growth or customer relationships will later be checked by the IPO lawyers and auditors, and a gap between the two documents raises questions. Forward-looking statements must be clearly marked as such, and the memorandum should carry a risk section.
Financial model
The model links the historical audited accounts with the forecast and with the valuation. Investors look at the assumptions behind revenue growth, margins, capital expenditure and working capital, and at how the model reconciles to the IFRS statements. A good model shows scenarios, including a delayed IPO, and the effect of the round on the cap table: dilution, conversion of instruments and the possible effect of a ratchet.
Due diligence and data room structure
Pre-IPO investors usually run financial, legal and tax due diligence, and sometimes commercial, technical or ESG reviews. The data room is a virtual space where the company places documents for that work. Its structure should mirror the investor's checklists, so that each question has an obvious folder.
| Folder | Typical contents |
|---|---|
| 1. Corporate | Charter documents, registers, group chart, minutes of board and shareholder meetings, past share issues |
| 2. Financial | Audited IFRS statements, management accounts, budget, financial model, debt and guarantees |
| 3. Tax | Tax returns, rulings, transfer pricing, tax audits and disputes |
| 4. Commercial | Key customer and supplier contracts, market data, pricing, pipeline |
| 5. Assets and IP | Real estate titles and leases, equipment, trademarks, patents, software licences |
| 6. People | Management contracts, incentive plans, headcount, policies |
| 7. Legal and compliance | Licences and permits, litigation, regulatory correspondence, sanctions and AML checks |
| 8. IPO preparation | Readiness report, restructuring plan, governance changes, adviser engagement letters |
| 9. Q and A | Investor questions, answers and supplementary documents |
Access should be logged, with staged permissions: sensitive contracts or customer names may open only to the final bidder. For companies with links to jurisdictions under sanctions, checking sanctions restrictions is required at every stage, both for the company and for each investor admitted to the data room.
NDA
The non-disclosure agreement defines what information is confidential, who may receive it inside the investor's organisation and among its advisers, how long the obligation lasts and what happens to the documents if talks stop. In a pre-IPO context it should also cover a ban on soliciting employees and customers and, for listed investors or their affiliates, rules on inside information once the IPO is announced.
Legal documents of the round
- Term sheet: a short, mostly non-binding summary of price, instrument, amount and key rights; binding only for exclusivity, confidentiality and costs.
- SPA (share purchase or subscription agreement): the binding contract to issue or sell shares, with conditions to closing, warranties of the company and founders, and limits of liability.
- SHA (shareholders' agreement): governance, reserved matters, transfer restrictions, tag and drag, information rights, IPO-related rights and their termination at listing.
- Updated charter documents of the company, reflecting new share classes and rights.
- Ancillary documents: disclosure letter against the warranties, board and shareholder resolutions, instrument terms for convertibles.
The warranties in the SPA are as important as the price. They are given against the disclosure letter, so anything disclosed in the data room reduces the founders' liability later. A well prepared data room therefore protects the sellers as much as it informs the buyer. This article is part of the Eurasia Consulting Group educational guide for issuers.