What to Watch for in a Mandate Engagement Letter
Most companies don't pay enough attention to the mandate letter, since it's signed before the deal has even started; yet this document frames the entire relationship for the deal's duration.
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.
Corporate FinanceAs an independent corporate finance advisory firm in Türkiye, we define the capital a company needs for growth, investment or transformation, make it financeable and secure it from the right source.
Learn moreFrequently asked questions
How long is a typical exclusivity period?
Typically six months to a year; if performance falls short, an early termination right should be negotiated.
How long should the tail provision last?
Generally six to twelve months is considered reasonable; longer periods are rarely justifiable.
Is a mandate letter negotiable?
Yes; many companies accept the standard template as-is, but these clauses are almost always open to negotiation.
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