What to Watch for in a Mandate Engagement Letter

Limiting the exclusivity period

Advisors typically demand an exclusivity period during which the client can't work with another advisor. It's important that this period be reasonable in length and include a termination right.

An undefined or overly long exclusivity period can keep the client tied down unnecessarily if the advisor's performance falls short.

Clearly defining fee triggers

Which event triggers the success fee, signing, closing, or the actual transfer of funds, needs to be explicitly defined; otherwise an unexpected dispute can arise once the deal reaches completion.

Scenarios where the advisor didn't directly bring the deal but the client closed with an investor found independently (tail provision, carve-out list) should be addressed in the agreement upfront.

Balancing termination and the tail provision

Most mandate letters include a "tail provision" that preserves the advisor's fee right for a defined period after the agreement ends (typically six months to a year) for deals with parties the advisor introduced.

The scope of this clause should be limited strictly to parties the advisor directly introduced; an overly broad tail provision can keep the client obligated for far too long.

The list of excluded parties

Potential investors or buyers the client was already in contact with before the deal started should be explicitly listed as "carve-outs" in the mandate letter.

If this list is left incomplete or vague, the client can end up owing an advisory fee even for a relationship they initiated themselves.

Capping expense reimbursement

Setting a cap requiring prior approval for expense reimbursements requested on top of the advisory fee (travel, third-party advisor costs) prevents unexpected billing surprises.

The agreement should explicitly state that these expenses are subject to prior written approval.

Frequently asked questions