Prerequisites in Investment Banking and M&A

The term “investment banking” is frequently interchanged with business brokerage as well as the mergers and acquisition industry. Investment banking is, in fact, an integral part of mergers and acquisitions. Investment banks provide much of the financial funding for M&A deals. However, it must be noted that not all business brokers are M&A advisors and not all M&A experts are investment bankers. Business brokers generally handle the sale of smaller businesses (with a transactional value under $1 million), while an M&A intermediary works with larger corporations or other legal entities. It is vital for those considering the sale or valuation of their company to recognize the difference between investment banking and licensed mergers and acquisitions advisors. Federal law does not always require these firms to operate within the recommended credentials.

The classical definition of investment banking hails from the Glass-Steagall Act put forth in 1933. This definition states that an investment bank is an organization meant to raise capital for a client’s benefit but does not accept deposits. In order to differentiate investment banking from commercial banking, the federal government has put in place some regulations. However, over the years, the term’s usage has transformed to include professionals from the mergers and acquisitions industry and the regulations have become less clearly defined.

Investment banks typically work under a securities license issued by the Securities and Exchange Commission (SEC), monitored by FINRA. Any M&A advisor or investment advisor is required under state and federal law to register with a broker-dealer, yet some conditions do not demand registration. For example, if the advisor is not selling securities to the public or it is an all cash deal, he or she is not mandated to possess licensure.

SEC suggests that M&A advisors possess, at minimum, a Series 63 (Uniform Securities Agent State Law Exam) and Series 79 (Investment Banking Exam) license if the transaction involves the exchange of securities. Yet these licensures are not requirements unless the activity falls under the category of transfer of securities, so it is critical for business buyers and sellers to check the credentials of the advisors before enlisting the help of a firm. Not all firms that sell businesses professionally are required to prove they possess the requisite knowledge or licenses essential for properly representing the client. Therefore, it is beneficial for those seeking out assistance in buying or selling their business to request references and a list of qualifications before choosing to work with an advisor.

George & Company is unique in its ability to satisfy the needs of all sizes of companies that are contemplating a sale. Our advisors and intermediaries carry the requisite licensing to handle most transactions. We make it a point to require each of our advisors to undergo rigorous training and subscribe to mergers and acquisitions practices as well as gain appropriate licensure. For an accredited M&A advisor, George & Company is one firm that assures quality and professionalism through official requisites. Call today for a confidential consultation.