Warner Norcross + Judd LLP Partner Shane Hansen provided insight into a change in federal securities law that clarifies and simplifies the regulation of merger and acquisition (M&A) advisors and business brokers (M&A brokers) serving sellers and buyers of private companies. The new law exempts private company M&A brokers from regulation like investment bankers in public company M&A transactions. In the Grand Rapids Business Journal article “Local expert weighs in on new M&A legislation,” Hansen discusses the new exemption which amends the Securities Exchange Act of 1934, and its impact in private company M&A transactions.
Hansen served as principal draftsman of the legislation as securities counsel for the three leading national associations of M&A professionals: the Alliance of Merger and Acquisition Advisors, the International Business Brokers Association and the M&A Source and the Business Intermediary Education Fund in bringing this to Congress. “The purpose for this whole effort started with the ambiguity created when our ‘one-size-fits-all’ federal system of securities regulation is applied to private company merger and acquisitions transactions,” said Hansen.
Private company sellers and buyers negotiate the legal structure for their M&A transactions — usually the sale of its assets but sometimes the sale or exchange of its stock — turning an M&A broker into a “stockbroker.” Without this change in the law, to sell or exchange a private company’s stock in an M&A transaction required the M&A broker’s extensive and expensive registration as a “broker” with the Securities and Exchange Commission (SEC) and regulation by Financial Industry Regulatory Authority (FINRA) — just like Wall Street investment banking firms brokering public company M&A transactions. Impacting private company M&A transactions, the failure to be properly registered and regulated put the M&A transaction at risk.
“It’s helpful for small business owners to have the assurance that the M&A broker they’re using need not be securities licensed and regulated, and this legal change allows M&A brokers to provide their professional services at a more cost-effective price point,” said Hansen. Minimum engagement fees charged by registered and regulated investment bankers limited the affordability and availability of M&A brokerage services to smaller privately owned business sellers and buyers.
Read the full Grand Rapids Business Journal article here.
Hansen’s 40-year law practice concentrates on financial services regulation, primarily involving federal and state securities and banking laws, and FINRA regulation of member broker-dealers and their registered professionals. He advises broker-dealers, investment advisers, private fund advisers, M&A brokers, banks and family offices about a wide range of business, corporate, contract, compliance and regulatory topics. . Learn more about his practice here.
By providing discerning and proactive legal advice, Warner Norcross + Judd LLP builds a better partnership with our clients. An AmLaw 200 firm, we’re one of Michigan’s largest law firms focused on providing the best legal solutions and exceptional client service to organizations throughout the world. Connect with us on wnj.com, LinkedIn, Twitter or Facebook.
# # #