Bill Would Jumpstart Small Company M&A By Cutting Red Tape

Jan 17 2014, 11:46am CST | by

Bill Would Jumpstart Small Company M&A By Cutting Red Tape

By Craig Barner

A bill aimed at reducing regulations on the sale of small private businesses is likely to receive approval in Congress.

If adopted, the Small Business Mergers, Acquisitions, Sales and Brokerage Simplification Act of 2013 under the U.S. House version (HR 2274), would grease the wheels for business brokers and investment bankers who focus on small private companies mostly because compliance costs would be sharply reduced.

On January 14, in an extremely rare example of overwhelming bipartisan support, the House approved HR 2274 by a 422-0 vote. That same day, a companion bill, S 1923, was introduced in the Senate by Joseph Manchin III (D-W.Va.) and David Vitter (R-La.).

The Senate bill would amend the Securities Exchange Act of 1934 to exempt from registration brokers who help facilitate the sales of small and medium privately held companies—those with EBITDA of $25 million or less, says Michael Nall, president of the Alliance of Merger & Acquisition Advisors (AMAA), a supporter of the bill.

Under the 1934 act, brokers pay registration fees, which usually range between $5,000 and $75,000 a year, to the Financial Industry Regulatory Authority (FINRA), Nall says. In addition, initial set-up and compliance costs often exceed $150,000, according to testimony before a subcommittee of the House Committee on Financial Services by Shane Hansen, a partner with law firm Warner, Norcross & Judd on behalf of the AMAA.

Brokers generate on average $200,000 to $300,000 in commissions a year. The registration fees paid by brokers to FINRA might not be “back breaking” but they are “significant,” Nall contends.

By lowering compliance costs, which are passed along to business owners, Nall says retiring Baby Boomers may be more likely to sell their businesses than shut them down. And he notes there is already “pent-up demand” for acquisitions among strategic buyers and private-equity firms with “record” amounts of cash to deploy. The bill “will open the flood gates,” Nall predicts.

The Senate has not yet taken up the bill, but Nall expects activity related to it by the end of March. If passed, the bill would be sent to President Obama for his approval or bundled into other legislation.

Regardless of the form it would take, the bill is expected to win the president’s approval, Nall says. In April 2012, he notes, Obama signed the JOBS Act, short for Jumpstart Our Business Startups Act, a law intended to encourage funding of small businesses by easing regulations. Now, the JOBS Act 2.0 is being considered in Congress.

Job prospects would likely improve under the measure, Nall says. During the Great Recession, the average large company jettisoned 2,000 jobs, but the average small private employer added 20 jobs, he notes, citing data from a study by Ohio State University. If small companies are kept afloat by selling to larger companies, employment numbers could benefit, he says.

As the Senate sorts through these issues, Nall notes that there is no organized opposition to the bill. FINRA has not taken a position on the legislation, according to a spokesperson.

Also, in October, A. Heath Abshure, a securities commissioner in Arkansas and Immediate Past President of the North American Securities Administrators Association (NASAA), an association of state-based regulators, said state securities administrators “generally” support HR 2274 and that NASAA “welcomes its introduction.”

Craig Barner is based in Chicago and is a reporter for Mergermarket. He can be reached at craig.barner@mergermarket.com.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Global entrepreneurship summit boost for SMEs
Marrakech, Nov 22 (IANS) Nine agreements were signed between the Moroccan General Confederation of Enterprises (CGEM) and several small and medium enterprises (SMEs) as well as between major Moroccan banks and start-ups at the 5th Global Entrepreneurship Summit (GES 2014) held in Morocco.
 
 
NASA's flying saucer among 'Best of What's New'
Washington, Nov 22 (IANS) NASA's Low-Density Supersonic Decelerator (LDSD), a spacecraft that aims to facilitate the safe landing of future Mars missions, has earned a place in the the Popular Science magazine's "Best Of What's New" list.
 
 
Indian helping to light up Gambia (Diaspora Feature)
Banjul (Gambia), Nov 22 (IANS) Like many Indians who are proving to be philanthropists around Africa, Ram Mohan has set up a social business called Comafrique Intelizon Initiative and has embarked on the replacement of candles in villages in the Gambia with solar lights from India.
 
 
Leopards in human areas not conflict animals: Study
New Delhi, Nov 22 (IANS) Leopards in human areas are not always "stray" or "conflict" animals but residents with strategies to thrive in human dominated areas, says the first GPS-based study of leopards in India.
 
 
 

Latest from the Network

Sharif urges Obama to take up Kashmir issue with India
Islamabad, Nov 22 (IANS) As US President Barack Obama confirmed his India visit for the Republic Day next year, Pakistan Prime Minister Nawaz Sharif urged him to take up the Kashmir issue with India. Obama spoke to...
Read more on Politics Balla
 
Hiding tattoos irks Chris Hemsworth
Los Angeles, Nov 22 (IANS) Actor Chris Hemsworth says he hates having his tattoos covered while shooting for films. In an interview with PEOPLE magazine, the actor also mentioned that it takes hours to cover the...
Read more on Celebrity Balla
 
Bynes has real medical issue: Ribeiro
Los Angeles, Nov 22 (IANS) Actor Alfonso Ribeiro says actress Amanda Bynes, who grabbed headlines recently for her erratic behaviour, acted strangely on the set of the film "Love Wrecked" in 2005. In an interview with...
Read more on Celebrity Balla
 
Walmart 1-Hour Deals also Available Online
The Walmart Black Friday 2014 Ad revealed 9 1-Hour Guarantee Doorbuster deals available in the Walmart Black Friday 2014 Sale. The Walmart Black Friday 2014 sale will start online Thanksgiving morning and lead right...
Read more on Black Friday Countdown
 
Pune FC aim for semi-spot in King's Cup
Thimpu, Nov 22 (IANS) Pune FC will be up against fellow Indian side Assam State Electricity Board (ASEB) in a crucial third round group stage encounter of the King's Cup at the Changlimithang Stadium here Sunday. The...
Read more on Sport Balla
 
We're doing okay: Zak after Robin Williams' death
Los Angeles, Nov 22 (IANS) Late actor-comedian Robin Williams' son Zak says that the family is still coming to terms with life after the actor's death. Zak, 31, opened up about how his family is coping since his...
Read more on Celebrity Balla
 
Indian golfers Shiv, Chiragh tied 13th, 14th at Manila
Manila, Nov 22 (IANS) Indian golfers Shiv Kapur and Chiragh Kumar fired five-under 67 each to finish tied 13th and joint 14th, respectively, after the third round of the $1 million Manila Masters at the par-72 Manila...
Read more on Sport Balla
 
Saarc panel decides to close regional centres
Kathmandu, Nov 22 (IANS) The Saarc Programming Committee, meeting here Saturday for its 49th session ahead of the 18th Saarc Summit, has decided to close down three regional centres and merge four others, bringing down...
Read more on Politics Balla
 
Nepal-India border to be sealed during Modi visit
Kathmandu, Nov 22 (IANS) Some parts of the Nepal-India border will be sealed during Indian Prime Minister Narendra Modi's visit to Lumbini, the birthplace of Lord Buddha, an official said here Saturday. Three...
Read more on Politics Balla
 
Australia rest pace trio ahead of India series
Melbourne, Nov 22 (IANS) Cricket Australia (CA) Saturday opted to rest pace trio Mitchell Johnson, Peter Siddle and Josh Hazlewood for the upcoming Sheffield Shield round matches, keeping in mind the upcoming Test...
Read more on Sport Balla