Series 79 Cheat Sheet

Total cost to acquire a company. You pay equity holders, assume debt, receive cash. EV-based multiples are capital-structure neutral — the most important concept in IB valuation.

Re via CAPM: Rf + β × (Rm − Rf). The (1−T) factor = tax shield from deductible interest. Forgetting it is the #1 WACC mistake.

Strip out leverage to get asset beta. Use median unlevered beta from comps, then re-lever for the target's capital structure.

Cash available to all capital providers. The core DCF input. FCF Yield = FCF ÷ EV — quick screen for undervalued targets.

Accounts for 60–80% of total DCF value. The growth rate (g) and WACC are the most sensitive inputs.

Include both long-term and short-term debt. Net Debt / EBITDA is the key leverage ratio. Below 2x = conservative. 3–4x = moderate. 5x+ = LBO territory.

DSO = 365 ÷ (Revenue ÷ Avg AR). DIO = 365 ÷ (COGS ÷ Avg Inv). DPO = 365 ÷ (COGS ÷ Avg AP).

EBITDAR adds back rent — used for airlines, retailers, restaurants, healthcare. The "R" = Rent.

Smooths volatile growth into a single annualized rate. Used in pitches: "12% revenue CAGR over 5 years."

Positive = creating value above cost of capital. Negative = destroying value even if accounting profits are positive.

EV multiples: EV/EBITDA, EV/Revenue (pre-interest metrics).
Equity multiples: P/E, P/B, PEG (post-interest metrics).
Never mix Market Cap / EBITDA — that's a conceptual error.

Buyer P/E > Target P/E → Accretive (buying "cheaper" earnings with "expensive" shares).
Buyer P/E < Target P/E → Dilutive. All-stock deal rule of thumb.

Spread % = Spread ÷ POP. Components: Selling concession (largest, ~60%), underwriting fee (~20%), management fee (~20%).

Quick ratio excludes inventory (least liquid current asset). Interest Coverage = EBIT ÷ Interest Expense — below 1.0x = can't cover interest.

Rule 101: Distribution participants cannot bid/purchase during restricted period.
Rule 102: Issuers and selling holders cannot bid/purchase.
Rule 103: Passive market making exception for Nasdaq.
Rule 104: Stabilization — only legal manipulation. Bid at or below offering price.
Rule 105: No short selling 5 business days before pricing.

WKSI: $700M+ public float OR $1B+ non-convertible securities in 3 years.
Reg D 506(b): Unlimited raise, up to 35 non-accredited, NO general solicitation.
Reg D 506(c): Unlimited raise, general solicitation OK, ALL buyers must be verified accredited.
Reg A+ Tier 1: $20M in 12 months. Tier 2: $75M in 12 months.
Rule 144 holding period: 6 months (reporting issuers) / 12 months (non-reporting).
Rule 144A: Resale to QIBs ($100M+ in securities). No holding period.
Greenshoe: Up to 15% over-allotment option.
Lock-up: Typically 180 days post-IPO.

Rule 2241: Research analyst bright-line prohibition — IB cannot direct research content.
Rule 5110: Corporate financing — underwriting compensation review.
Rule 5121: Conflicts of interest in public offerings.
Rule 5130: IPO allocation restrictions — restricted persons (employees, family) cannot buy.
Rule 5141: Fixed price offering — sell at stated POP until syndicate released.
Rule 5150: Fairness opinion — disclosure of compensation and conflicts required.
Rule 5190: Deal wires — notify FINRA of stabilization, penalty bids.

Section 11: Liability for material misstatements in registration statement. Strict liability for issuer; due diligence defense for underwriters.
Section 12: Liability for selling unregistered securities (12(a)(1)) or prospectus misstatements (12(a)(2)).
Section 23: Unlawful to represent SEC approved or found registration accurate.
Rule 176: Factors for "reasonable investigation" (due diligence defense).
Rules 137/138/139: Research report safe harbors during distribution.

Rule 14d-10: All holders / best price rule — same price to all tendering shareholders.
Rule 14e-1: Offer must remain open 20 business days. Any change → additional 10 days.
Rule 14e-2: Target board must respond within 10 business days.
Rule 14e-3: Insider trading prohibition in tender offers.
Rule 13e-3: Going-private transactions — enhanced disclosure.
Rule 13e-4: Issuer self-tender offers.
Proration: Partial tender oversubscribed → purchase pro rata from all.

$100M: QIB threshold for Rule 144A resales.
$700M: WKSI public float threshold.
$75M: Reg A+ Tier 2 annual limit.
$5M: Examiner required in bankruptcy if unsecured debt exceeds this.
$395: Series 79 exam fee. 73%: Passing score.

302: CEO/CFO certify financial statement accuracy.
402: Prohibits personal loans to executives.
403: Accelerated insider transaction reporting.
404: Management assessment of internal controls (auditor attestation for accelerated filers).
906: Criminal penalties for false certifications.

IRC 280G: 20% excise tax on golden parachute payments exceeding 3× base compensation.
IRC 338(h)(10): Stock deal taxed as if asset deal — buyer gets step-up in basis.
IRC 355: Tax-free spinoff requirements (80%+ distribution, business purpose).

1. Organizational meeting → 2. S-1 filed (registration) → 3. SEC review + comments → 4. Preliminary prospectus ("red herring") → 5. Road show → 6. Book building (IOIs) → 7. Pricing → 8. Allocation → 9. Final prospectus → 10. Trading begins → 11. Stabilization if needed → 12. Greenshoe decision (30 days)

1. Engagement letter → 2. Valuation analysis → 3. Teaser (anonymous) → 4. NDA signing → 5. CIM distributed → 6. First-round bids (IOIs) → 7. Shortlist (3–4 buyers) → 8. Management presentations + data room → 9. Final bids (binding) → 10. Definitive agreement → 11. HSR filing → 12. Closing

Poison pill: Dilute hostile bidder above trigger (typically 15–20%). Forces negotiation.
Staggered board: Directors elected in classes — can't replace full board in one year.
White knight: Seek a friendlier acquirer to bid higher.
Crown jewel: Sell the most valuable asset to make target less attractive. Last resort.
Golden parachute: Expensive executive payouts triggered by change of control.
Supermajority: Require 67–80% vote for mergers (vs. simple majority).
Control share statutes: State laws strip voting rights above 20%/33%/50% thresholds.

1. Secured creditors (collateralized debt)
2. DIP financing + administrative claims (super-priority)
3. Unsecured creditors (trade payables, unsecured bonds)
4. Subordinated debt
5. Mezzanine / convertible debt
6. Preferred stock
7. Common stock (last — usually gets nothing)

Chapter 11 (Reorganization): Company continues operating as "debtor in possession." Files plan of reorganization. Creditor vote: 2/3 in amount + 1/2 in number per class. Court can "cram down" over objecting classes.

Chapter 7 (Liquidation): Trustee appointed. Assets sold. Proceeds distributed by priority. Company ceases to exist.

Sale of assets outside ordinary course of business. Stalking horse bid sets a floor price. Auction follows. Assets sold "free and clear" of liens and claims — major advantage for buyers.

Examiner required: Unsecured debt > $5 million.
Non-call (NC): High-yield bonds typically NC/3 to NC/5 years.
Make-whole: PV of remaining interest payments at Treasury + spread. Makes early refinancing expensive.
Trustee appointment: For cause (fraud, incompetence) or in the interest of creditors.