New M&A Broker Exemption


A new federal exemption for M & A Brokers is going to be available as of March 29, 2024. Although there will be some limitations, the new law should be a substantial benefit to those involved in facilitating smaller mergers and acquisitions as well as a benefit to those companies using unregistered intermediaries.

The new law applies to M & A brokers engaged in effecting securities transactions solely in connection with the transfer of ownership of eligible privately held companies. Eligible privately held companies under the new law are those companies with prior year EBIDTA of less than $25 million or prior year gross revenues less than $250 million dollars. Further, they cannot have a class of securities registered with the U.S. Securities and Exchange Commission under Section 12 or Section 15(d). of the Exchange Act.

In order to rely on the exemption, the Broker must reasonably believe that upon consummation of the deal, the person acquiring the assets or securities of the privately held company; will control the company or business conducted and directly or indirectly be active in the management of the privately held company including the election of offices and the approval of an annual budget. There is a presumption of control if upon completion, the Buyer has the right to vote 25% or more of a class of voting securities or in the case of a partnership has the right upon dissolution or has contributed 25% or more of the capital.

There are a number of other conditions and restrictions which together with the terms make this new exemption helpful but not the final answer for smaller mergers and acquisitions.

Perry Douglas West, Esq.
[email protected]