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Abstract: 

A new Federal law has created an exemption from broker-dealer registration for an M&A broker who effects securities transactions in connection with the transfer of ownership of an eligible privately held company, which is a company with EBITDA of less than $25 million and gross revenues of less than $250 million for its last fiscal year and that satisfies certain other criteria. The transaction must be with a buyer (or buyers) that, after the transaction, will control, and, directly or indirectly, will be active in the management of, the target company. In this article, the author summarizes (1) the background and policy reasons for the new law, (2) key definitions in the new law, including “M&A broker,” “eligible privately held company,” and “control,” (3) excluded activities in which the broker cannot engage while remaining eligible for the exemption, (4) broker disqualifications, and (5) various interpretative issues, questions, and observations. The new Federal law does not preempt state law in this area.

Keywords: § 501 Registration Exemption for Merger and Acquisition Brokers; Excluded Activities

Affiliations:  1: Hunton Andrews Kurth LLP.