iMergeAdvisors
Legal

Disclosures.

iMerge Advisors, Inc., conducts M&A advisory services as an M&A Advisor as defined by the Securities and Exchange Commission (“SEC”). On January 31, 2014 the SEC’s Division of Trading and Markets issued a “no action” letter, in which the Division will not recommend enforcement if an M&A Advisor were to effect securities transactions in connection with the transfer of ownership of a privately held company under certain conditions.

Exemption criteria

The exemption pursuant to the M&A Advisors letter applies if the following criteria are satisfied:

01The broker cannot, directly or indirectly through affiliates, provide financing for the transaction.
02The broker cannot have custody or control of, or otherwise handle funds or securities issued in connection with, the transaction.
03The transaction cannot involve a public offering or a shell company, other than a business combination related shell company, a "NewCo".
04If representing both buyers and sellers, the broker must disclose who it represents and obtain consent to joint representations.
05If the transaction involves a group of buyers, the group must have been formed without the involvement of the broker.
06The buyer or group of buyers must control and actively operate the company or the business conducted with the assets of the business. Control will be presumed if the buyer, or buyer group has the right to vote 25% or more of a class of voting securities, has the power to sell or direct the sale of 25% or more of a class of voting securities, or, in the case of a partnership or limited liability company, has the right to receive upon dissolution or has contributed 25% or more of the capital.
07The transaction cannot involve transfers of interests to passive buyers.
08Any securities issued in the transaction must be restricted securities under Rule 144(a)(3) of the Securities Act of 1933.
09The broker must not have been barred or suspended from associating with a broker-dealer.
10The broker cannot have the ability to bind a party to the transaction.

What do these criteria mean for your transaction?

They set the boundary between an M&A Advisor and a registered broker-dealer. In practice they shape three things in every iMerge engagement: who we represent, how money moves at closing, and who holds the authority to commit you to a deal. None of them limit the advisory work itself.

Who does iMerge represent?

iMerge is sell-side. We represent the founder and the company, not the buyer, so the joint-representation disclosure in criterion 4 does not arise in a standard engagement. Criterion 5 requires that any buyer group form independently of the advisor: we introduce qualified buyers and run a competitive process, but we do not assemble the group that acquires you.

How do funds move at closing?

We do not finance transactions and we never take custody of deal proceeds. Funds move directly between the parties through counsel and escrow. Our compensation is a retainer plus a success fee invoiced to you — not a cut taken from the wire at closing.

Who has the authority to sign?

An M&A Advisor cannot bind a party to a transaction. We negotiate, model, and recommend; you decide and you sign. No letter of intent, term sheet, or purchase agreement becomes binding on you through anything we do.

Which transactions qualify for the exemption?

The exemption covers the transfer of a privately held operating business to a buyer who will control and actively run it. It excludes public offerings, shell companies, and passive investors, and requires that any securities issued be restricted under Rule 144(a)(3). A lower-middle-market software sale to a strategic acquirer or a private equity platform sits inside those bounds.

What regulatory standing does the exemption require?

It is available only to a broker that has not been barred or suspended from associating with a broker-dealer. That is a fair question to put to any advisor you are considering, and one worth asking before you sign an engagement letter.

If your transaction has a feature that falls outside these bounds — a public company on either side, a shell entity, or a buyer taking a passive stake — tell us early. It changes how the deal must be structured and who needs to be involved.

For more detail please see the SEC No-Action Letter.