Series 79 — Investment Banking Representative Exam Quick Reference

Last revised: June 29, 2026

Compact Series 79 quick reference for valuation, offerings, M&A, restructuring, documents, and compliance decision points.

Exam Identity

Item	Reference
Vendor/provider	FINRA
Official title	Series 79 — Investment Banking Representative Exam
Official code	Series 79
Page purpose	Independent quick-reference review for candidates preparing for the real exam
Core skill tested	Applying investment banking concepts to underwriting, mergers and acquisitions, tender offers, restructurings, valuation, due diligence, and securities law constraints

High-Yield Exam Lens

Series 79 questions often test whether you can choose the correct banking action, document, valuation method, or compliance response in a deal scenario.

If the question asks about…	Focus on…	Common trap
Public offering	Registration, prospectus, due diligence, underwriting, Regulation M, liability	Treating all offering communications as freely usable
Private placement	Exempt offering, investor qualification, resale restrictions, private placement memorandum	Confusing issuer exemption with investor resale exemption
M&A sale process	Confidentiality, CIM, IOIs/LOIs, diligence, definitive agreement, fairness	Assuming an LOI is always fully binding
Tender offer	Direct offer to shareholders, Schedule TO / target response, equal treatment concepts	Treating it like a negotiated merger vote
Valuation	Enterprise value, equity value, comps, precedent transactions, DCF, LBO	Mixing levered and unlevered cash flows
Restructuring	Seniority, liquidity, recovery, exchange offer, bankruptcy vs out-of-court	Ignoring priority of claims
Conflicts/MNPI	Information barriers, wall crossing, restricted list, research limits	Sharing client-sensitive information casually
Communications	Prospectus rules, retail communication review, tombstones, free writing prospectus concepts	Using pitch material as if it were a filed prospectus

Core Deal Workflow

    flowchart LR
	    A[Origination / Pitch] --> B[Engagement Letter]
	    B --> C[Due Diligence]
	    C --> D[Valuation / Structuring]
	    D --> E[Documentation]
	    E --> F[Marketing / Investor or Buyer Outreach]
	    F --> G[Negotiation / Pricing]
	    G --> H[Signing or Pricing]
	    H --> I[Closing / Settlement]
	    I --> J[Post-Closing Compliance / Stabilization / Integration]

Stage	Banker work product	Exam emphasis
Pitch	Credentials, market update, valuation, process proposal	Pitch books are not offering documents
Engagement	Scope, fees, expenses, indemnification, conflicts	Defines banker role and compensation
Diligence	Business, financial, legal, accounting, tax, regulatory review	Due diligence supports disclosure and liability defense
Structuring	Security type, consideration, leverage, covenants, tax/accounting effects	Structure affects risk, valuation, and investor suitability
Marketing	Prospectus, CIM, roadshow, term sheet, management presentation	Different rules for public vs private communications
Execution	Bookbuilding, negotiations, definitive agreements, pricing	Allocation, conflicts, and fair dealing matter
Closing	Funds flow, legal opinions, comfort letters, bring-down diligence	Closing conditions must be satisfied or waived
After closing	Stabilization, filings, lock-ups, integration, covenant compliance	Post-deal obligations continue

Valuation Formula Sheet

Enterprise Value and Equity Value

\[ \text{Enterprise Value} = \text{Equity Value} + \text{Debt} + \text{Preferred Stock} + \text{Noncontrolling Interest} - \text{Cash and Cash Equivalents} \]\[ \text{Equity Value} = \text{Share Price} \times \text{Fully Diluted Shares Outstanding} \]

Concept	Use	Exam trap
Enterprise value	Value of operating assets independent of capital structure	Do not subtract debt from EV when calculating EV/EBITDA
Equity value	Value attributable to common equity holders	Must use fully diluted shares when applicable
Net debt	Debt minus cash	Excess cash may be treated differently from operating cash
Preferred stock	Usually added to EV if it is financing-like	Do not treat as common equity unless converted
Noncontrolling interest	Added to EV when financials consolidate less-than-100%-owned subsidiaries	Match numerator and denominator
Associates / equity investments	Often subtracted or separately valued if not in EBITDA	Avoid mismatching EV with consolidated vs unconsolidated earnings

Fully Diluted Shares

Instrument	Dilution method	Key idea
Options / warrants	Treasury stock method	Assumes proceeds are used to repurchase shares
In-the-money options	Dilutive	Exercise price below current share price
Out-of-the-money options	Usually not dilutive	Exercise price above current share price
Convertible debt	If-converted method	Add shares; adjust earnings for after-tax interest if calculating diluted EPS
Convertible preferred	If-converted method	Add shares; adjust preferred dividends if relevant
Restricted stock / RSUs	Treated as shares or diluted shares depending on vesting/accounting facts	Read the scenario wording carefully

Treasury stock method:

\[ \text{Net New Shares} = \text{Options} - \frac{\text{Options} \times \text{Exercise Price}}{\text{Current Share Price}} \]

Comparable Companies Analysis

Step	Action	High-yield note
1	Select comparable public companies	Similar industry, size, growth, margins, geography, cyclicality
2	Normalize financials	Remove nonrecurring items; align fiscal years
3	Calculate trading multiples	EV/Revenue, EV/EBITDA, EV/EBIT, P/E
4	Apply selected multiple range	Use judgment; do not blindly average
5	Derive implied EV or equity value	Convert EV to equity value if needed
6	Divide by shares	Use fully diluted shares for per-share value

Multiple	Numerator	Denominator	Best used when
EV/Revenue	Enterprise value	Revenue	Early-stage, low-profit, margin differences require caution
EV/EBITDA	Enterprise value	EBITDA	Common for operating businesses; ignores capex and working capital
EV/EBIT	Enterprise value	EBIT	Useful when D&A/capital intensity matters
P/E	Equity value	Net income	Equity-focused; affected by capital structure
P/BV	Equity value	Book value	Financial institutions, asset-heavy businesses
Price / NAV	Equity value	Net asset value	Real estate, investment companies, natural resources

Precedent Transactions Analysis

Feature	Precedent transactions	Public trading comps
Value basis	Control value	Minority trading value
Includes control premium?	Usually yes	Usually no
Market condition sensitivity	Reflects deal market at announcement	Reflects current trading market
Data quality	Often limited by disclosure	Usually better for public companies
Best use	M&A value range	Current market valuation benchmark
Trap	Old or strategic deals may not be comparable	Market prices may reflect temporary dislocation

Discounted Cash Flow

Unlevered free cash flow:

\[ \text{UFCF} = \text{EBIT} \times (1 - \text{Tax Rate}) + \text{D\&A} - \text{Capex} - \Delta \text{NWC} \]

Enterprise value using DCF:

\[ \text{Enterprise Value} = \sum_{t=1}^{n} \frac{\text{UFCF}_t}{(1+\text{WACC})^t} + \frac{\text{Terminal Value}}{(1+\text{WACC})^n} \]

Perpetuity growth terminal value:

\[ \text{Terminal Value} = \frac{\text{UFCF}_{n+1}}{\text{WACC} - g} \]

Exit multiple terminal value:

\[ \text{Terminal Value} = \text{Exit Multiple} \times \text{Final Year Metric} \]

WACC:

\[ \text{WACC} = \frac{E}{D+E}R_e + \frac{D}{D+E}R_d(1-T) \]

CAPM cost of equity:

\[ R_e = R_f + \beta(R_m - R_f) \]

DCF item	Correct treatment	Common trap
UFCF	Cash flow available to all capital providers	Do not subtract interest expense
WACC	Discount rate for unlevered cash flow	Do not use cost of equity for UFCF
Levered FCF	Cash flow after interest and debt repayment	Discount with cost of equity, not WACC
Terminal growth	Must be less than WACC in perpetuity formula	Unrealistic growth creates distorted value
Capex	Cash outflow	Do not ignore maintenance capex
NWC increase	Cash outflow	Inventory/receivables growth consumes cash
D&A	Added back because noncash	But capex may more than offset it

LBO Quick Reference

LBO driver	Effect on sponsor return
Lower purchase price	Increases return
Higher exit multiple	Increases return
Higher leverage, if sustainable	Increases equity return but raises risk
Faster debt paydown	Increases equity value at exit
EBITDA growth	Increases enterprise value and debt capacity
Lower capex / working capital needs	Improves cash flow for debt repayment
Higher interest rates	Reduces cash flow and return

Basic sponsor equity return:

\[ \text{MOIC} = \frac{\text{Exit Equity Value}}{\text{Initial Sponsor Equity}} \]\[ \text{Exit Equity Value} = \text{Exit Enterprise Value} - \text{Net Debt at Exit} \]

LBO exam issue	Rule of thumb
Uses debt to finance acquisition	Target cash flow supports debt service
Sponsor return depends on equity value, not just EV	Debt reduction is a major source of value
Management rollover	Aligns management with sponsor
Dividend recap	Sponsor extracts cash by adding or refinancing debt
Covenant breach risk	Higher leverage reduces flexibility

Financial Statement and Ratio Reference

Income Statement, EBITDA, and Cash Flow

Metric	Calculation / meaning	Use
Gross profit	Revenue minus cost of goods sold	Product/service margin
EBITDA	EBIT plus depreciation and amortization	Operating proxy before capital structure and noncash D&A
EBIT	Earnings before interest and taxes	Operating income after D&A
EBT	Earnings before tax	After interest expense
Net income	Bottom-line earnings to equity holders	EPS, P/E, retained earnings
Operating cash flow	Cash generated by operations	Includes working capital effects
Free cash flow	Cash available after capex	Debt repayment, dividends, valuation

Balance Sheet Links

Change	Cash impact	Reason
Accounts receivable increases	Cash decreases	Revenue not yet collected
Inventory increases	Cash decreases	Cash tied in inventory
Accounts payable increases	Cash increases	Expenses not yet paid
Accrued expenses increase	Cash increases	Expense recognized before cash payment
Deferred revenue increases	Cash increases	Cash received before revenue recognized
Debt increases	Cash increases	Financing inflow
Debt repayment	Cash decreases	Financing outflow

Core Credit and Operating Ratios

Ratio	Plain-text formula	Interpretation
Gross margin	Gross profit / revenue	Product or service profitability
EBITDA margin	EBITDA / revenue	Operating profitability before D&A
Net margin	Net income / revenue	Bottom-line profitability
Debt / EBITDA	Total debt / EBITDA	Leverage
Net debt / EBITDA	Net debt / EBITDA	Leverage net of cash
EBITDA / interest	EBITDA / interest expense	Interest coverage
EBIT / interest	EBIT / interest expense	Stricter interest coverage
Current ratio	Current assets / current liabilities	Short-term liquidity
Quick ratio	Cash + marketable securities + receivables, divided by current liabilities	More conservative liquidity
ROE	Net income / average equity	Equity profitability
ROA	Net income / average assets	Asset efficiency
Asset turnover	Revenue / average assets	Revenue generated per asset dollar

M&A Quick Reference

Transaction Structure Matrix

Structure	Buyer acquires	Seller liability transfer	Shareholder approval issues	Typical use
Stock purchase	Shares of target	Target liabilities remain in target	Target shareholder consent required	Private company sale or control acquisition
Asset purchase	Selected assets and liabilities	Buyer can choose assumed liabilities, subject to law and contract	May require seller approval depending on significance	Carve-outs, liability isolation
Merger	Target merges with buyer or subsidiary	Liabilities generally remain with surviving entity	Board and shareholder approvals may apply	Public company acquisitions
Tender offer	Shares directly from shareholders	Buyer seeks control by buying shares	Target board response important	Public company acquisition, including hostile deals
Reverse triangular merger	Buyer sub merges into target; target survives	Target contracts may remain more intact, subject to change-of-control clauses	Often used for public and private targets	Preserve target entity
Forward merger	Target merges into buyer or buyer sub	Target entity disappears	May affect contracts/licenses	Integration-focused acquisitions

Consideration Choices

Consideration	Buyer effect	Seller effect	Exam trap
Cash	Certainty of value; uses cash or debt	Immediate liquidity	May increase buyer leverage
Stock	Preserves buyer cash	Seller shares future upside/downside	Exchange ratio matters
Fixed exchange ratio	Shares fixed; value floats with buyer stock price	Market risk to seller	Not the same as fixed value
Fixed value collar	Attempts to stabilize value	Adjusts shares within range	Collar terms are deal-specific
Earnout	Defers value based on performance	Bridges valuation gap	Can create disputes over control/accounting
Seller note	Deferred payment obligation	Credit exposure to buyer	Often subordinate to senior financing
Rollover equity	Seller retains ownership	Aligns interests	Illiquidity and minority rights matter

Public M&A Documents

Document	Used in	Purpose
Merger agreement	Negotiated merger	Definitive contract: price, covenants, reps, conditions, termination
Proxy statement	Shareholder vote	Provides disclosure for vote
Registration statement / prospectus	Stock consideration issuance	Registers buyer shares if required
Tender offer materials	Tender offer	Offer terms and bidder disclosure
Target recommendation statement	Tender offer	Target board position and reasons
Fairness opinion	Board process	Financial advisor opinion on fairness from a financial point of view
Confidentiality agreement	Early M&A process	Protects nonpublic information
CIM	Auction process	Detailed selling document for bidders
LOI / indication of interest	Early bid stage	Nonbinding or partially binding proposal terms

M&A Agreement Provisions

Provision	What it does	High-yield point
Representations and warranties	Statements of fact by parties	Breach may trigger indemnity or closing failure
Covenants	Promises to do or not do something	Interim operating covenants restrict target actions
Conditions precedent	Must be satisfied before closing	Financing conditions shift risk
MAC / MAE clause	Allows exit for severe adverse changes	Usually heavily negotiated
Indemnification	Allocates post-closing losses	Survival periods, caps, baskets are key
Escrow / holdback	Secures indemnity claims	Reduces seller cash at closing
No-shop	Limits seller solicitation of other bids	Fiduciary-outs may permit superior proposals
Break-up fee	Fee payable if deal terminates in specified cases	Must not improperly preclude better bids
Bring-down certificate	Confirms reps remain true at closing	Closing diligence issue

Capital Markets and Securities Offerings

Offering Type Decision Table

Offering	Buyers	Disclosure	Resale	Banker focus
Registered public offering	Public investors	Registration statement and prospectus	Generally freely tradable after issuance	Due diligence, underwriting, prospectus delivery/communications
IPO	First public equity sale	Extensive registration disclosure	Public trading after offering, subject to lock-ups and restrictions	Roadshow, bookbuilding, pricing, syndicate
Follow-on offering	Already-public issuer	Updated public disclosure	Public trading	Market risk, dilution, Regulation M
Shelf takedown	Securities issued from shelf registration	Base prospectus plus supplement	Public trading	Speed and eligibility
Private placement	Limited investor base	Private offering materials	Restricted securities	Investor qualification, exemption, placement process
Rule 144A-style institutional resale	Institutional market	Offering memorandum	Resales limited to eligible institutional buyers	Liquidity vs public registration
PIPE	Private investment in public equity	Private placement plus public company disclosure	Often registration rights	Pricing discount, resale registration
Rights offering	Existing shareholders	Offering document	Depends on structure	Anti-dilution / shareholder participation
At-the-market offering	Sales into market over time	Program documentation	Public trading	Market impact and agency execution

Underwriting Structures

Structure	Banker obligation	Issuer risk	Banker risk
Firm commitment	Underwriter buys from issuer and resells	Execution more certain	Inventory/market risk
Best efforts	Banker attempts to sell, no full purchase commitment	More execution risk	Lower inventory risk
Mini-max / all-or-none concepts	Offering closes only if conditions met	Proceeds uncertainty until condition met	Must follow stated terms
Bought deal	Underwriter commits before broad marketing	Fast execution	High market risk
Syndicated underwriting	Multiple banks share distribution	Broader distribution	Allocation and role issues

Equity vs Debt vs Hybrid Securities

Security	Investor return	Issuer effect	Key risk
Common stock	Dividends and price appreciation	Permanent equity; dilutive	Lowest priority in liquidation
Preferred stock	Preferred dividend and seniority to common	Equity or hybrid treatment	Dividend restrictions, redemption terms
Investment-grade debt	Interest and principal	Lower cost if credit strong	Interest and refinancing risk
High-yield debt	Higher coupon	More flexible than equity but costly	Covenants and default risk
Convertible debt	Coupon plus conversion option	Lower coupon, potential dilution	Conversion and call features
Warrants	Option-like upside	Sweetener to financing	Dilution
Mezzanine debt	Subordinated debt, often with equity upside	Flexible capital	Higher cost and subordination

Debt Covenant Reference

Covenant type	Example	Purpose
Affirmative covenant	Provide financial statements, maintain insurance	Requires action
Negative covenant	Limits debt, liens, dividends, asset sales	Restricts risk-increasing behavior
Financial maintenance covenant	Maintain leverage or coverage ratio	Ongoing compliance test
Incurrence covenant	Restricts actions unless test met	Common in high-yield style debt
Change of control	Repurchase or default trigger	Protects lenders from ownership change
Restricted payments	Limits dividends, buybacks, junior debt payments	Preserves credit support
Asset sale covenant	Controls use of sale proceeds	Prevents collateral leakage

Securities Law and Compliance Quick Reference

Registration and Exemption Concepts

Concept	Practical meaning	Exam point
Securities Act registration	Required absent exemption for securities offers/sales	Focuses on primary issuance disclosure
Exempt offering	Issuer avoids public registration if conditions met	Securities may still be restricted
Restricted securities	Acquired in unregistered transactions	Resale limitations matter
Control securities	Held by affiliates/control persons	Resale restrictions can apply even if securities were registered
General solicitation	Public marketing of private offering	Permitted only under certain exemption paths
Accredited / institutional investors	Investor qualification concepts	Suitability and exemption conditions depend on investor type
Integration	Multiple offerings may be treated as one	Avoid structuring around registration rules improperly

Public Offering Communication Categories

Communication	Purpose	Trap
Prospectus	Statutory disclosure document	Must be accurate and not misleading
Preliminary prospectus / red herring	Marketing before final pricing	Does not include final price terms
Final prospectus	Final offering terms	Delivery/access rules are important
Free writing prospectus concept	Written offer outside statutory prospectus	Filing/legend/use conditions may apply
Tombstone ad	Limited announcement	Not a full sales document
Research report	Analyst communication	Subject to independence and conflict rules
Roadshow	Investor presentation	Content must align with disclosure record

Regulation M and Market Conduct

Topic	Practical rule
Distribution participants	Underwriters and related parties face trading restrictions during distributions
Restricted period	Designed to prevent manipulation around an offering
Stabilization	Permitted only under specific conditions and disclosure requirements
Penalty bids	May discourage flipping when properly used
Passive market making	Limited market activity may be permitted under conditions
Exam trap	Do not assume underwriters can freely support the stock price during an offering

MNPI, Insider Trading, and Information Barriers

Situation	Correct response
Banker receives material nonpublic information	Keep confidential; share only on need-to-know basis
Public-side employee needs private-side information	Wall-crossing procedures required
Client asks banker to trade before announcement	Do not trade on MNPI; escalate to compliance
Bank has advisory role and trading desk activity	Restricted/watch list and information barrier controls may apply
Research analyst involved in banking pitch	Be alert to independence and conflict restrictions
Rumor or leak	Escalate internally; do not selectively confirm MNPI

Term	Meaning
Material	Reasonable investor would consider it important
Nonpublic	Not broadly disseminated to the market
Need-to-know	Access limited to those required for the mandate
Wall crossing	Controlled process to bring a person over an information barrier
Restricted list	Limits or prohibits trading/research due to MNPI or conflicts
Watch list	Internal monitoring list, usually confidential

Liability and Due Diligence

Liability area	Applies to	Core idea
Material misstatement or omission	Offering and market communications	Disclosure must not mislead
Due diligence defense	Underwriters and other parties in registered offerings	Reasonable investigation supports defense
Control person liability	Persons with control influence	Supervisory/control role can matter
Anti-fraud rules	Securities transactions broadly	Fraudulent or deceptive conduct prohibited
Selective disclosure risk	Public company communications	Avoid favored disclosure to select investors

FINRA Conduct Themes

Theme	Candidate should recognize
Fair dealing	Communications and recommendations must be fair and not misleading
Suitability / investor appropriateness	Especially relevant in private placements and complex products
Conflicts of interest	Disclose and manage banker, issuer, affiliate, and compensation conflicts
Supervision	Firm procedures and approvals matter
Recordkeeping	Communications, approvals, and diligence files must be retained under firm rules
Gifts, entertainment, political contributions	Restrictions may affect public finance and institutional relationships
AML / KYC	Customer identity and suspicious activity escalation are compliance responsibilities

Restructuring and Distressed Situations

Capital Structure Priority

Claim	Typical priority concept
Secured debt	Claim supported by collateral
Senior unsecured debt	Senior contractual claim without specific collateral
Subordinated debt	Paid after senior claims
Preferred equity	Senior to common, junior to debt
Common equity	Residual claim, highest risk

Restructuring Alternatives

Alternative	Description	When used
Amend and extend	Modify covenants/maturity	Temporary liquidity issue
Refinancing	Replace existing debt	Market access available
Exchange offer	Swap old securities for new securities	Reduce debt, extend maturities, or change terms
Consent solicitation	Seek holder approval to amend terms	Need covenant relief
Asset sale	Sell assets to raise liquidity	Noncore assets or strategic sale
Out-of-court restructuring	Negotiated solution without court process	Creditor support sufficient
Bankruptcy process	Court-supervised restructuring or liquidation	Liquidity, creditor conflict, or legal protection needed
DIP financing concept	Financing during bankruptcy process	Provides operating liquidity with court oversight

Recovery Analysis

Factor	Effect on recovery
Collateral value	Higher collateral improves secured recovery
Senior debt amount	More senior claims reduce junior recovery
Enterprise value	Higher reorganization value improves recoveries
Administrative and priority claims	Reduce value available to creditors
Intercreditor agreement	Determines rights among creditor classes
Going-concern vs liquidation value	Going-concern may exceed liquidation value, but not always

Deal Documents Reference

Document	Deal type	Purpose
Engagement letter	Banking mandate	Scope, fees, indemnity, conflicts, termination
NDA / confidentiality agreement	M&A, private placements	Protects nonpublic information
Teaser	M&A sale process	Anonymous summary to gauge interest
CIM	M&A sale process	Detailed confidential business description
Management presentation	M&A / financing	Management-led investor or buyer presentation
Indication of interest	M&A auction	Preliminary nonbinding valuation and terms
Letter of intent	M&A negotiation	Key terms; may include binding confidentiality/exclusivity
Definitive purchase agreement	M&A	Binding transaction contract
Fairness opinion	M&A board process	Financial fairness analysis, not legal advice
Registration statement	Public offering	SEC-filed disclosure for registered securities
Prospectus	Public offering	Investor disclosure and sales document
Underwriting agreement	Public offering	Issuer-underwriter contract
Lock-up agreement	IPO/follow-on	Restricts insider or shareholder sales
Comfort letter	Public offering	Auditor procedures on financial information
Legal opinion	Closing	Counsel opinion on specified legal matters
Blue sky memorandum	Securities offering	State securities law reference
Placement agent agreement	Private placement	Banker role in private sale
Subscription agreement	Private placement	Investor purchase agreement and representations
Term sheet	Financing	Summary of economic and legal terms
Indenture	Debt offering	Bond contract and covenants
Credit agreement	Loan financing	Loan terms, covenants, events of default

Accounting, Tax, and Purchase Price Concepts

Concept	Practical meaning	Exam relevance
Cash-free, debt-free purchase price	Seller keeps cash and repays debt unless otherwise negotiated	Common M&A pricing convention
Working capital peg	Target level of working capital at closing	Purchase price adjustment mechanism
Purchase accounting	Buyer records acquired assets/liabilities at fair value	Creates goodwill or bargain purchase effects
Goodwill	Purchase price above fair value of identifiable net assets	Tested for impairment
Deferred tax asset	Future tax benefit	Valuation allowance may reduce usefulness
Deferred tax liability	Future tax obligation	Often arises from book-tax differences
NOLs	Tax losses that may offset future taxable income	Use can be limited after ownership changes
Accretion	Transaction increases buyer EPS	Not the same as value creation
Dilution	Transaction decreases buyer EPS	May still be strategically attractive
Synergies	Revenue enhancement or cost savings	Must assess timing, certainty, and implementation cost

Accretion / Dilution Framework

Step	Action
1	Start with buyer standalone net income
2	Add target net income
3	Add after-tax synergies if included
4	Subtract after-tax lost interest on cash used
5	Subtract after-tax interest on new debt
6	Subtract new preferred dividends if applicable
7	Add or subtract acquisition accounting effects
8	Divide by new pro forma shares
9	Compare pro forma EPS to buyer standalone EPS

\[ \text{EPS} = \frac{\text{Net Income Available to Common Shareholders}}{\text{Weighted Average Diluted Shares}} \]

Financing method	EPS effect
Cash	Reduces interest income; no new shares
Debt	Adds interest expense; no new shares
Stock	Adds shares; dilution depends on buyer P/E vs target contribution
Mix of cash/debt/stock	Combined effect; read assumptions

Common Scenario Traps

Scenario wording	Better exam interpretation
“The banker believes the company is undervalued based on EBITDA.”	Determine whether EV/EBITDA or equity multiple is appropriate before answering
“The issuer wants to avoid registration.”	Identify the exemption and resale limitations
“The buyer offers stock worth a fixed dollar amount.”	This is not the same as a fixed exchange ratio
“The bank has MNPI but the trading desk wants to make a market.”	Think information barriers, restricted list, Regulation M, and compliance escalation
“The fairness opinion says the deal is fair.”	Fair from a financial point of view; not a guarantee, recommendation, or legal opinion
“A private placement investor wants to resell immediately.”	Restricted securities and resale rules matter
“The target has high EBITDA but heavy capex.”	EBITDA may overstate cash generation
“The transaction is accretive.”	Accretion does not prove economic value creation
“Comparable companies trade at lower multiples.”	Consider growth, margins, risk, size, and market timing
“The sponsor can add more debt.”	Debt capacity is limited by cash flow, covenants, and market appetite

Fast Decision Checklist

Valuation

Are you valuing enterprise value or equity value?
Are the cash flows levered or unlevered?
Does the discount rate match the cash flow?
Are multiples applied to the correct metric?
Are financials normalized for nonrecurring items?
Are minority interest, cash, debt, preferred stock, and associates treated consistently?
Are synergies included only when the question supports them?

Offering

Registered or exempt?
Primary issuance, secondary sale, or resale?
Public investors, accredited investors, or institutional buyers?
Firm commitment or best efforts?
What document controls: prospectus, offering memorandum, term sheet, or subscription agreement?
Are communications restricted by offering rules?
Is Regulation M relevant?

M&A

Stock purchase, asset purchase, merger, or tender offer?
Cash, stock, debt, earnout, rollover, or mixed consideration?
Friendly or hostile?
Public or private target?
Is shareholder approval required?
Are there fiduciary, disclosure, fairness, or conflict issues?
Are tax, accounting, financing, and regulatory approvals conditions to closing?

Compliance

Is there material nonpublic information?
Who is allowed to know it?
Is the firm on both advisory and trading sides?
Has compliance approved the communication or wall crossing?
Could the communication be misleading or incomplete?
Are conflicts disclosed and managed?
Is the investor type appropriate for the product or exemption?

Practical Next Step

Use this Quick Reference as a final-pass checklist, then work through mixed Series 79 practice questions by deal type: valuation first, then offerings, M&A, restructuring, and compliance. Track every missed question by the decision rule you failed to apply.

Scenario Guide

Data Analysis