Glossary · Deal documents
Prospectus
Definition
A prospectus is the disclosure document a company publishes when it offers securities to the public or lists on an exchange. It covers the business, risks, financial statements and management, and it has to be approved by the market regulator. Drafting it involves extensive due diligence by banks and lawyers.
Related terms
Due diligence The investigation a buyer, investor or lender runs on a company before committing: its finances, contracts, legal position and operations. Asset purchase agreement The contract for buying selected assets and liabilities of a business, instead of its shares. Change of control clause A contract term that lets the other party end or renegotiate the contract if the company is sold. Confidential information memorandum The detailed sales document a seller's adviser sends to buyers after they sign an NDA. Disclosure letter The seller's list of known exceptions to its warranties, which limits what the buyer can later claim for. Indemnity A promise to repay a specific loss in full, often used for known risks found in due diligence. Letter of intent A mostly non-binding document that sets out the main terms of a deal before the final contract is negotiated. Material adverse change A clause that lets a buyer walk away if something seriously damages the business between signing and closing.