Series 79 Cheatsheet — Valuation Toolkit, Offerings, M&A & Restructurings

Series 79 is “investment banking workflow + valuation logic.” The best answer is usually the one that follows the correct process, uses the right definition/math, and picks the safest compliant next step.

This cheat sheet is a study aid (not legal advice). Always follow your firm’s written supervisory procedures (WSPs) and current FINRA/SEC requirements.

Exam map (where points come from)

Series 79 at a glance (FINRA)

• Items: 75 scored + 5 unscored (80 total)
• Time: 2 hours 30 minutes (150 minutes)
• Passing score: 73

Job functions and weights

Study reality: most Series 79 misses are either (a) using the wrong valuation definition (EV vs equity), (b) confusing registered vs exempt offering paths, or (c) missing a process/document step in a deal timeline.

How Series 79 questions are written (exam mindset)

• Most questions are scenario-based: “what happens next?”, “which document is used?”, “which valuation approach fits?”, or “what is the compliant next step?”
• The exam rewards sequence (deal timeline), definitions (EV vs equity, FCF, dilution), and discipline (disclose, document, escalate).
• If the stem mentions a document (registration statement, PPM, CIM, subscription agreement, fairness opinion), the correct answer often turns on that document’s purpose.

Rule and regulation map (Series 79 scope)

Series 79 isn’t a rule-number memorization exam, but it frequently references rules/forms and expects you to know the “direction” of compliance.

Series 79 “best answer” checklist (use on every scenario)

1. What transaction is this? financing vs M&A vs tender offer vs restructuring
2. What stage are we in? pitch/mandate → diligence/modeling → documentation → marketing → pricing/signing → closing
3. What is the correct definition? EV vs equity, FCF, dilution, control premium, priority waterfall
4. What document drives the step? registration statement/prospectus, PPM/OM, engagement letter, CIM, term sheet, purchase agreement, fairness opinion
5. What is the compliant next step? verify facts, escalate to legal/compliance, update disclosure, deliver required docs, document and proceed

Scope: Series 79 vs other registrations (high yield)

• Series 79 is for investment banking activities: analysis, structuring, transaction support, and contributing to marketing materials.
• Actively selling securities to investors or directly marketing an offering to investors can require other registrations (depending on activity and offering type).
• If you see “roadshow presentations” or “soliciting investor orders,” ask yourself whether the activity described is sales/solicitation vs investment banking support.

F1 — Financial statements and valuation toolkit

Data collection: what you pull and why (Series 79 level)

Series 79 expects you to recognize common information sources and how they feed models and marketing materials.

Common data sources:

• Issuer/company: financial statements, management projections, capital structure, customer/contracts, KPIs, guidance.
• Regulatory filings: 10-K/10-Q/8-K, proxy statements, ownership filings (Schedules 13D/13G), institutional holdings (13F).
• Market data: trading price, volume, credit spreads, yields, comparable company multiples, precedent deals.
• Internal: prior deal comps, internal pricing color from syndicate/capital markets, internal diligence notes.

High-yield exam move: if information is missing or inconsistent, the safest step is usually verify and document (and escalate to legal/compliance when it’s disclosure-sensitive).

Financial statements: what moves what

Income statement

• Revenue – expenses = operating income; subtract interest/taxes = net income.
• Nonrecurring items distort comparability; many analyses use “normalized” earnings.

Balance sheet

• Assets = liabilities + equity (snapshot).
• Working capital changes (AR, inventory, AP) often drive cash flow.

Cash flow statement

• CFO: starts with net income and adjusts for non-cash items and working capital changes.
• CFI: capex, acquisitions, investments.
• CFF: debt and equity issuance/repayment, dividends, repurchases.

High-yield linkages:

• Capex increases → lower free cash flow in the period (cash outflow).
• Depreciation → reduces net income but is added back in CFO (non-cash).
• AR increases → cash outflow (uses cash).
• AP increases → cash inflow (provides cash).

High-yield ratio and metric formulas (Series 79 level)

EBITDA vs EBIT (don’t confuse)

• EBIT: operating income (before interest and taxes).
• EBITDA: EBIT + Depreciation + Amortization (plus/minus adjustments, company- and deal-specific).

Exam trap: if the stem says “EBITDA,” don’t answer with an EBIT-based multiple or vice versa unless the question explicitly indicates equivalence.

Normalization and “quality of earnings” (high yield)

IB valuation work often uses normalized earnings/EBITDA to improve comparability.

Common adjustment categories (recognize the label):

• Nonrecurring: one-time legal settlements, restructuring charges (fact pattern driven).
• Non-operating: gains/losses not tied to core operations.
• Run-rate: cost savings or step-ups that are expected to persist (high level).

Exam pattern: if a question asks “why adjust?”, the answer is usually “to make company metrics comparable and representative of ongoing performance.”

Core valuation definitions

• Equity value (market capitalization) = price per share × diluted shares outstanding.
• Enterprise value (EV) = value of the entire operating business (capital structure neutral).

High-yield EV bridge (conceptual):

EV = Equity Value + Net Debt + Preferred + Minority Interest - Excess Cash

Notes:

• Use net debt (debt − cash) when cash is non-operating/excess.
• Minority interest is added when consolidating subs you don’t fully own (so EV matches consolidated EBITDA).
• Preferred is usually treated as debt-like for EV purposes.

Multiples: which one, when?

EV-based (capital structure neutral)

• EV/EBITDA: common for mature companies; “pre-capex” proxy for operating cash flow.
• EV/EBIT: sensitive to depreciation policy; more comparable when capex needs are similar.
• EV/Sales: used when EBITDA is negative/unreliable; sensitive to margin differences.

Equity-based

• P/E: depends on capital structure and tax; meaningless when earnings are negative.
• P/B: more relevant for asset-heavy/financial firms; requires careful accounting context.

Multiple-selection traps:

• Don’t compare EV multiple to equity metric (e.g., EV/Net Income).
• Don’t use P/E when capital structures differ materially and the question is asking for an operating valuation lens.

Valuation method selection (quick guide)

Share count and dilution basics (Series 79 level)

If a question requires “equity value” or “price per share,” be ready to think about diluted shares.

• Basic shares: common shares outstanding.
• Diluted shares: basic shares plus dilutive securities (options/warrants/convertibles), depending on moneyness/structure.

Treasury stock method (TSM) concept for in-the-money options/warrants:

Incremental Shares ≈ Options × (1 − Exercise Price / Current Price)

If-converted method concept for convertibles:

• assumes conversion if it is dilutive and economically sensible (high level).

Exam trap: using basic shares when the question clearly implies dilution (e.g., “fully diluted,” “assume conversion,” or a large in-the-money option package).

Comparable companies vs precedent transactions (control premium mindset)

• Comparable companies: public trading multiples (minority, liquid market values).
• Precedent transactions: paid multiples in actual deals (often include a control premium).

If the question hints at “what buyers paid” or “control premium,” precedent transactions are usually the right lens.

Discounted cash flow (DCF) basics (Series 79 level)

DCF is “value = present value of future free cash flows.”

Common high-level steps:

• Forecast free cash flow (FCF) for explicit years.
• Choose a discount rate (WACC concept).
• Add terminal value (perpetuity growth or exit multiple approach).
• Discount everything back to present.

Free cash flow (high-level):

• Unlevered FCF is before interest and is consistent with EV.

Unlevered FCF (common form, concept):

Unlevered FCF = EBIT × (1 − Tax Rate) + D&A − Capex − ΔNWC

WACC and discount rate basics (Series 79 level)

WACC is the “blended required return” on the firm’s financing mix (concept).

WACC = (E/V) × Re + (D/V) × Rd × (1 − Tax Rate)

Where:

• E/V and D/V are equity and debt weights.
• Re is cost of equity (CAPM concept: Rf + β × (Rm − Rf)).
• Rd is pre-tax cost of debt (yield/credit spread concept).

Exam traps:

• mixing levered cash flows with WACC (definition mismatch)
• forgetting the after-tax nature of the cost of debt in WACC

Terminal value approaches:

• Perpetuity growth: assumes long-run steady growth.
• Exit multiple: applies a multiple to a terminal-year metric (e.g., EBITDA).

Terminal value formulas (concept):

• Perpetuity growth: TV = FCF_(n+1) / (WACC − g)
• Exit multiple: TV = EBITDA_n × (Exit EV/EBITDA multiple)

DCF traps:

• Don’t mix levered cash flows with WACC (definition mismatch).
• Terminal assumptions must be realistic (long-run growth can’t exceed the economy forever).

Sensitivities and sanity checks (Series 79 level)

DCF and multiples often show up as ranges, not single points.

Common sensitivity axes:

• DCF: WACC vs g (perpetuity growth) or WACC vs exit multiple
• Trading comps: multiple range (low/median/high) × metric (LTM/NTM)

Sanity check mindset:

• if DCF value is far outside reasonable comp ranges, re-check assumptions and definitions (EV vs equity).

Accretion/dilution (what’s driving the sign)

Accretion/dilution is “does the deal raise or lower the acquirer’s EPS?”

High-yield drivers:

• Stock deal: dilution increases if you issue many new shares.
• Cash/debt deal: interest expense increases (after tax), which can reduce EPS.
• Synergies: usually increase EPS (if credible and not fully priced in).
• Purchase price / premium: higher premium makes accretion harder.

Rule-of-thumb logic (exam-style):

• “High premium + stock issuance + low synergies” → likely dilutive.
• “Reasonable price + cash funded + strong synergies” → more likely accretive.

Quick pro forma EPS logic (high level):

• start with acquirer net income
• add target net income (or earnings contribution)
• subtract after-tax financing costs (debt interest) and add synergies (net of costs, if assumed)
• divide by pro forma share count (including new shares issued)

Due diligence: what you’re trying to prove (Series 79 level)

Due diligence is about validating the story, surfacing risks, and ensuring disclosures are supportable.

Common diligence workstreams (recognize the category):

• Financial/accounting: quality of earnings, revenue recognition, working capital, debt-like items.
• Legal/regulatory: litigation, contracts, regulatory approvals, compliance history.
• Tax: structure, NOLs, transfer pricing, withholding considerations (high level).
• Commercial: market size, customer concentration, churn/retention, pricing power.
• Operations: supply chain, manufacturing, scalability, key vendors.
• Technology/IP: ownership, licensing, security posture (high level).

High-yield exam move: if diligence identifies a material risk, the “best” answer often includes update disclosure and adjust terms (or obtain approvals) rather than ignoring it.

F2 — Underwriting and new financing transactions

Deal lifecycle (simplified)

1. Mandate (engagement letter)
2. Due diligence + modeling
3. Documentation (registered: registration statement/prospectus; exempt: PPM/OM)
4. Marketing (materials + meetings within rules)
5. Pricing and allocation (book-building)
6. Closing (funds flow, deliveries, confirmations)

Who does what (high level)

Registered offering documents (Series 79 level)

• Registration statement: filed with the SEC; contains the prospectus and other required information (high level).
• Preliminary prospectus (“red herring”): marketing-stage disclosure document (high level).
• Final prospectus: delivered after pricing (high level).
• Prospectus supplement: used in shelf takedowns to update terms (high level).

High-yield exam move: if a question asks “where is this disclosed?”, the best answer is often “in the prospectus/PPM,” not in an ad hoc email or slide.

Common SEC registration forms (high level)

• Form S-1: typical for IPOs and companies without shelf eligibility (high level).
• Form S-3: shelf-capable issuers and faster follow-ons/takedowns (high level).
• Form S-4: securities issued in M&A transactions (high level).

Registered vs exempt: the core distinction

• Registered offering: Securities Act registration statement and prospectus-driven disclosure process.
• Exempt offering: relies on an exemption; still subject to anti-fraud and fair disclosure principles.

High-yield trap:

• “Exempt security” ≠ “exempt transaction.” Securities and transactions can be exempt for different reasons.

Common offering types (recognize the name)

• IPO: first time a company sells shares to the public.
• Follow-on: additional registered offering by a public company.
• Primary vs secondary: primary raises company capital; secondary is selling shareholders.
• Shelf registration: pre-register securities for later takedowns.
• ATM: sells stock into the market over time (flow issuance).

Underwriting economics (high level)

Know the “gross spread” concept and common components:

• Management fee (running the deal)
• Underwriting fee (underwriting risk)
• Selling concession (distribution/sales credit)

Series 79 typically tests concepts and workflow, not the exact basis-point breakdown.

Syndicate basics (who does what)

• Lead/Bookrunner: runs the process, builds the book, coordinates pricing and allocation.
• Co-managers: support distribution and relationships.
• Selling group: distributes without being full underwriters (structure-specific).

Syndicate mechanics you must recognize:

• Underwriting spread: gross fee; includes management fee + underwriting fee + selling concession (high level).
• Overallotment/greenshoe: allows extra shares to stabilize aftermarket demand (high level).
• Stabilization: permitted within strict rules; manipulation-type behavior is a classic trap.

Greenshoe and syndicate short covering (concept):

• greenshoe provides flexibility to cover overallotments and support orderly distribution (high level).

Book-building and pricing (Series 79 level)

Core idea: the book reflects demand and price sensitivity.

• Roadshow: marketing meetings to build demand (within rules).
• Indications of interest (IOIs): non-binding demand signals (high level).
• Order book: who wants how much at what price (high level).
• Allocation: distributing shares/bonds among investors based on strategy and constraints (high level).

Exam trap: confusing the role of investment banking (process/support) with the role of sales/trading (soliciting and taking orders).

Exempt offerings (Series 79 level)

You don’t need to memorize every exemption detail; you do need the “which bucket is this?” reflex:

• Reg D / private placements: capital raising with investor qualification constraints (high level).
• Rule 144A: resale to large institutions (QIB concept).
• Regulation S: offshore offerings (non-U.S. distribution concept).

Common questions test:

• the investor qualification concept (accredited vs institutional buckets), and
• the resale restriction mindset (“restricted securities” and limits on resale).

Exempt offering “which one is this?” quick map (high level)

Exempt securities vs exempt transactions (with examples)

• Exempt securities (concept): certain securities may be exempt from Securities Act registration (e.g., U.S. government and municipal securities, high level).
• Exempt transactions (concept): certain transactions are exempt even if the security is not (e.g., private placement exemptions, Regulation D concept).

Exam trap: confusing “this security is exempt” with “this transaction is exempt.”

Communications traps (high yield)

If a question asks “what should you do,” the best answer often includes:

• confirm the offering path (registered vs exempt),
• deliver/point to the controlling disclosure document (prospectus or PPM),
• avoid promissory language, and
• escalate to legal/compliance when a statement could be misleading.

F3 — M&A, tender offers, and restructurings

Sell-side M&A: the standard flow

• Engagement → teaser/CIM → NDA → data room → indications of interest → management presentations → final bids → select buyer → negotiate → sign → close.

Key sell-side deliverables (know the purpose):

• Teaser: anonymous high-level summary to gauge interest.
• CIM: detailed business and financial story.
• Process letter: rules/timeline for bids and access.
• Management presentation: deeper story and Q&A.

M&A documents: what each one does (Series 79 level)

• NDA: controls confidentiality and information sharing.
• IOI / LOI: non-binding expression of interest; sets price/structure intent (high level).
• Term sheet: summary of key economics and structure (high level).
• Definitive agreement: binding contract (merger agreement / purchase agreement).
• Disclosure schedules: detailed exceptions and disclosures that “back up” reps and warranties (high level).

Buy-side M&A: what changes

• More emphasis on target screening, synergy modeling, and financing plan.
• More integration risk thinking.

Deal structure vocabulary (must be fluent)

• Stock purchase: buyer acquires shares; liabilities often remain in the target entity.
• Asset purchase: buyer picks assets/liabilities; consents and tax consequences matter (fact pattern driven).
• Merger: statutory combination; shareholder approvals may be required.

Consideration types:

• Cash: simple but can increase leverage.
• Stock: preserves cash but creates dilution.
• Mixed: tradeoffs between leverage and dilution.

High-yield legal/term concepts (exam favorites)

• Reps and warranties: statements of fact; breaches trigger remedies.
• Covenants: promises about conduct between signing and closing.
• Closing conditions: what must be true to close (approvals, accuracy of reps, no injunction, etc.).
• Working capital adjustment: true-up based on target working capital at close.
• Earnout: contingent payment tied to future performance.
• Escrow/holdback: funds reserved to cover claims.
• MAC/MAE: material adverse change/event concept used in closing conditions/termination (high level).
• Break fee: paid if deal terminates under specified conditions.

Purchase price mechanics (Series 79 level)

These concepts show up constantly in M&A valuation questions:

• Equity purchase price: Offer price per share × fully diluted shares
• Implied enterprise value: equity purchase price plus net debt and other debt-like items (high level)
• Net debt: Debt − Cash (cash treatment depends on whether it is excess/non-operating)

Working capital adjustment concept:

• purchase price adjusts if closing working capital differs from a target level (high level).

Signing to closing: what happens in the middle (high level)

Between signing and closing, most steps are about satisfying conditions:

• regulatory filings/approvals (e.g., antitrust, industry-specific approvals; high level)
• shareholder approvals (if required)
• financing completion and funds flow readiness
• interim operating covenants and “ordinary course” requirements
• closing deliverables: officer certificates, legal opinions, bring-downs (high level)

Exam trap: confusing signing (agreement executed) with closing (money and securities/assets exchange hands).

Fairness opinions (why they exist)

Fairness opinions are used to support board decision-making, typically addressing whether consideration is fair from a financial point of view, based on stated assumptions and limitations.

High-yield traps:

• Conflicts of interest must be disclosed/managed.
• A major price/term change can require an update (fact pattern driven).

Tender offers (Series 79 level)

Tender offers are purchase offers made to shareholders with specific disclosure and procedural requirements.

Know the concepts:

• issuer vs third-party tender offers
• required filings and disclosure (Schedule TO concept)
• withdrawal rights, proration, and equal treatment themes
• changes in terms generally require disclosure and time to respond (high level)

High-yield tender offer timing concept:

• tender offers generally must remain open long enough for investors to make an informed decision (often tested as “minimum offer period” concepts; exact timing depends on offer type/rules).

Restructuring and bankruptcy basics (Series 79 level)

Core concepts:

• Out-of-court: amendments, exchange offers, negotiated workouts.
• In-court: bankruptcy process (Chapter 11 reorganization vs Chapter 7 liquidation).

Priority waterfall mindset (simplified):

• secured debt → unsecured debt → subordinated debt → preferred equity → common equity

Common tools:

• DIP financing: new financing provided during bankruptcy (priority/terms are negotiated).
• 363 sale: asset sale process during bankruptcy (high level).
• Debt-for-equity swap: deleveraging by exchanging debt claims for equity.

Restructuring workflow (Series 79 level)

Out-of-court (concept):

• covenant amendments and waivers
• exchange offers (old debt → new debt/equity, high level)
• negotiated workouts with creditor groups

In-court (Chapter 11 concepts):

• automatic stay (halts most collection/enforcement, high level)
• DIP financing to fund operations
• plan of reorganization + disclosure statement
• creditor classes and voting/confirmation concepts (high level)

Recovery analysis mindset:

• estimate enterprise value range
• apply the priority waterfall to determine which claims are “in the money”

Common trap:

• Valuation drives who gets paid. If EV is below debt, equity is often impaired (conceptually).

High-yield “if you see X → do Y” patterns

• “EV vs equity confusion” → build the EV bridge and sanity-check what metric the multiple applies to.
• “Negative earnings” → P/E often breaks; use EV/Sales or focus on cash flow/multiples (fact pattern).
• “Customer wants a guarantee in an offering” → correct misconception; point to risk factors; escalate if needed.
• “Contingency/AON-like offering” → strict funds handling/escrow mindset; don’t release proceeds early (high level).
• “Material diligence red flag” → update disclosure and/or adjust terms; don’t bury it.
• “Deal stage question” → pick the next document/process step (NDA → data room → LOI → definitive agreement → closing).
• “Signing vs closing confusion” → remember closing conditions and the interim covenant period.
• “Distressed situation” → think in a waterfall: secured → unsecured → subordinated → preferred → common.

Common traps (fast review)

• Mixing equity value and enterprise value in the same step.
• Treating pre-money vs post-money valuation as interchangeable (they are not).
• Confusing registered offering requirements with private placement practices.
• Assuming “exempt” means “no disclosure” (anti-fraud still applies).
• Forgetting deal stage: many questions are really asking “what happens next?”

Glossary (high yield)

• Accretion/dilution: whether a transaction increases or decreases EPS (high level).
• Accredited investor / QIB: investor eligibility concepts used in private/institutional offerings (high level).
• CIM: Confidential Information Memorandum used in M&A marketing.
• DCF: Discounted cash flow valuation method based on present value of future cash flows.
• DIP financing: financing provided during bankruptcy with special priority (high level).
• EV (Enterprise Value): value of operations independent of capital structure; commonly bridged from equity value with net debt and other claims.
• Greenshoe: overallotment option used in underwriting to manage demand and stabilization (high level).
• IOI: indication of interest used in marketing/book-building processes (high level).
• MAC/MAE: material adverse change/event concept used in closing conditions (high level).
• PPM/OM: disclosure document used in exempt/private offerings (high level).
• Precedent transactions: comparable deals used to estimate value, often reflecting control premiums.
• Stabilization: regulated activity intended to support orderly distribution/aftermarket trading (high level).
• Shelf registration: registration that allows later offerings/takedowns without starting from scratch (high level).
• WACC: weighted average cost of capital; common discount rate concept in DCF.