Primary market private placements of securities are exempt from public registration under Rule 4(a)2 of the Securities Act of 1933. The most common exemption used is the Regulation D "safe harbor". Until recently, Regulation D offerings were prohibited from "general solicitation". Now, after the passage of the JOBS Act, new rules allow issuers of securities to market their securities to a much broader audience, potentially increasing the likelihood of raising capital. However, for such offerings, the SEC demands heightened scrutiny in verifying that each investor is an "accredited investor". To be an an accredited investor, the person or entity generally must meet certain income or net worth qualifications.
Guidance for Issuers
The chance of success when raising capital can be significantly increased with the assistance of professionals who have spent years developing relationships with accredited and institutional investors. Investors do not invest with strangers or in deals sent to them unsolicited. They invest in deals that have been referred to them by their trusted advisers. Selectively target investors for each opportunity and do not blast out emails indiscriminately. To more effectively access a wider audience, some advisers may choose to cross-pollinate investment opportunities with other advisers within their trusted network.
In selecting an adviser, issuers should look for the following attributes:
- Selective targeting of investors based upon substantive relationships
- Relationships with strategic, institutional investors
- Assistance with SEC compliance and exemptions from registration
Guidance for Investors
From the investor's perspective, an adviser should have the procedures in place to conduct the appropriate level of due diligence on an opportunity and a commitment to compliance to ensures that the advisers only present opportunities that align with the investor's objectives.
In selecting an adviser, investors should look for the following attributes:
- Multi-tiered due diligence process prior to approval for distribution
- Anti-money laundering and "Know Your Customer" background checks on all parties
- Investment opportunities presented must be suitable to the investor's objectives
Strategic Mergers & Acquisitions
Mergers & acquisitions present unique challenges due to their complex structuring, the sophistication of the parties, and the enormous investment of time and money. Success requires a multi-faceted set of skills. Rich experience in investment banking, private equity, legal, and accounting fields are all a plus. Advisory services should be proactive and help companies and their stakeholders develop and execute successful exit strategies throughout a long-term client relationship.
In selecting an adviser, companies should look for the following attributes:
- Exceptional negotiation skills and track record
- Innovative approach to deal preparation and execution
- Sophistication, preferably with big firm experience
- A niche focus and experience with the industry at-hand
- Objective view of the proposed transaction to correctly identify issues and red flags