What is an M&A broker under federal law?
The Consolidated Appropriations Act, 2023, enacted December 29, 2022, added an exemption to the Securities Exchange Act: an M&A broker is exempt from registering with the SEC as a broker 1. The exemption took effect 90 days after enactment, on March 29, 2023 13.
The law defines an M&A broker as a broker engaged in effecting securities transactions solely in connection with transferring ownership of an eligible privately held company, whether it acts for the seller or the buyer 1.
- Eligible privately held company
- A company with no class of securities registered with the SEC that, in the fiscal year before the broker is engaged, had EBITDA under $25 million, gross revenue under $250 million, or both. The thresholds are adjusted for inflation five years after enactment and every five years after that 2.
What were the rules before 2023?
From 2014, M&A brokers relied on an SEC staff no-action letter. Staff said they wouldn't recommend enforcement action if an M&A broker effected securities transactions in the transfer of ownership of a privately held company without registering, and the relief applied regardless of the company's size 3.
The staff withdrew that letter on March 29, 2023, the day the statutory exemption took effect 3.
What does an M&A broker do?
A 2017 report of the House Committee on Financial Services described M&A brokers as educating owners on the selling process, helping prepare the business for sale, analyzing its financials, performing or coordinating its valuation, and identifying, screening and marketing the business to qualified buyers 4.
Why does it matter how they're paid?
The SEC's guide to broker-dealer registration lists finding buyers and sellers of businesses, where securities are involved, among the activities that may require registration. It also asks whether compensation depends on the outcome or size of the deal, and says a yes may mean the person needs to register 5.
In a survey of middle-market M&A professionals in early 2025, average success fees ran from 4.8% on a $5 million deal to 2.0% on a $100 million deal 6.
Where does a fixed-fee advisor fit?
We sell defined pieces of work, such as a valuation, a confidential information memorandum or a second read on an offer, each at a fixed fee agreed in writing. You decide what to buy next, if anything.
If you want the whole sale run for you, that's on the menu too, the full sale process, scoped after the intro call and then fixed in writing. There's no success fee.
This is general information, not tax or legal advice. Your attorney and CPA should confirm how it applies to your sale.
