Information For Buyers…

Two of the most frequent questions asked by prospective buyers are "How long will it take, and what will I need to do?"  The following represents a typical process for buying a BD. It is written to give you a conceptual understanding of the process and timeline.

In practice, the time required from initial request to closing date will vary depending on a number of factors - complexity of the arrangements, how prompt the parties are in production of necessary documentation, and what kind of work load the regulators are under at time of submission of documentation for review.

Given the unique regulatory hurdles involved in purchasing a BD, it is well to note that if the transaction is not structured properly, there can be significant down time for the BD. However - If structured correctly, it is possible to purchase a BD with NO downtime. BDM specializes in this niche market and can guide you to a smooth transition.

Identification and Introduction:

>>A potential BUYER of a shell will typically find an interesting, clean, company which he/she is interested in. At this point the Buyer usually makes contact with BDM, and a confidentiality form is signed.  If the Buyer does not have a specific BD in mind, BDM will go to work locating a seller that fits the Buyers parameters. BDM has been in this niche market for many years, and has facilitated thousands of transactions. Consequently, we can often locate an appropriate seller, based on the Buyers needs, in a much shorter time frame than might be imagined. Once an appropriate seller has been identified,

>>Information about the seller is provided to the Buyer, including all public information like audited financials, current focus report and business plan. Introductions are made. If the Buyer is interested, and now wishes to do due diligence, he will place a refundable deposit in escrow, in order to take the potential purchase off the market for a short time (the market is very active, and BDs often move within days).

Exploration:

>>Accordingly, the BD is now taken off the market, and made unavailable to others for a 10 day period – allowing this time for due diligence . Experience has shown us that by this time, Buyers have typically found a match and will have their decision confirmed by the due diligence.  If there is a delay, and due diligence will take longer than 10 days, the potential Buyer may request an additional several days.

>>At this point, the seller will notify the FINRA of its intention to sell, and identify the potential buyer.

>>Once there has been a meeting of the minds, and due diligence has been successfully completed, buyer and seller will agree on a closing date. Note that the closing date will always be no sooner than 30 days after notification of intention to sell to the FINRA.  BDM will send skeleton purchase agreements to the Buyer and Seller, and both will tailor these agreements to suit their specifics, management arrangement, etc.

>>Buyer will wait to receive a 1017 package from the local FINRA office. It is important to note that the Buyer will have 30 days to create and file the 1017 package. There is a significant amount of work involved in preparation of the 1017, and preparation of this package can take a lot of hours, so the buyer MUST be prepared for this effort.

Close:

>>Depending upon the particular arrangement the buyer and seller have made, closing may take place prior to, or at the same time as the conclusion of the FINRA review of the Change in Membership (1017), when, as and if approved. Please note that depending upon the current work burden that the district regulators are facing, review times will vary. Often, the review takes 30 to 60 days. Infrequently, the review may take as long as several months.

BDM has shepherded thousands of successful transactions, and will guide the Buyer through all phases of the purchase process.  Should additional help be required, with the 1017, for example, consider using BDM’s proven team of consultants. Our consultants have significant transactional experience, and can make the process easier and smoother – done correctly, the first time.

To reduce Time on the Phone and lengthy explanations, before calling about any particular B/D, it would be enormously helpful if Potential Buyers:

1. Fill out a “Confidentiality Agreement” and Fax it back to Mark Harris (954) 565-8831 

2. Read the short “Complete Procedures for Buyers” document also available from Mark Harris (954) 565-2465

3. Be prepared to take the Broker Dealer "Off the Market" for Ten Business Days with an Escrow Deposit. No one else will be sent to the Seller until you have done the Due Diligence on the Broker Dealer. The Escrow Deposit is fully refundable by Bank-to-Bank or By Mail. *Note: the ten day period may be extended by several days upon request of the buyer.

4. If you need a "Plain Vanilla" Purchase Agreement, ask us to send you one. Work must be done on this agreement to adapt it to what you and the Seller have agreed to do.

5. Make sure that Seller has sent written notification to FINRA and identification of the Buyer. "Closing can take place 30 days after notification and identification,” unless buyer has tied the closing date to the FINRA’s approval.

6. Important! On the larger (300K to 10MM) Broker Dealer's for Sale, the Potential Buyer must provide "Proof of Funds" before being introduced to the Seller. Brokerages in the 11MM – 80MM range have different procedures; you will need to talk with BDM regarding these.

7. If a buyer needs a securities attorney to assist in putting together a purchase agreement or a securities consultant to put together the rule 1017(change of membership) package, ask BDM.

8. When given a sellers name and telephone number:

        A. Please be discrete. Speak only to the seller and to no one    else.

        B. Ask the seller if this is an appropriate time for him to discuss the subject.

        C. Try to get all your questions answered at this time or subsequent calls. Please do not ask for the due diligence package until you take the Broker Dealer off the market with an escrow deposit.

For additional information, see the "F.A.Q. for Buyers"