Engagement checklist engagement letter outline of timeframes and milestones

Here are a number of provisions within the engagement letter that need particular attention. Exclusivity is common in most investment banking sell-side engagements. Without exclusivity, investment bankers are not incentivized to spend significant time and effort to close transactions, especially on a success fee basis.

The engagement letter should clearly define the scope of the engagement. This would include a summary outline of significant milestones, deliverables and timelines for completion. A defined scope allows a selling firm to measure if the sale process is on track.

It is typical for the investment bank or the client to be able to terminate the engagement with advance notice, with or without cause. Some engagement letters will provide for automatic termination at the end of a specified period (usually a year) unless the parties agree to extend the mandate.

Success fees are based on some percentage of total transaction value, but the term "total transaction value" should be clearly defined in an engagement letter. All forms of consideration received by the vendor can be included in the "transaction value" and applicable to the success fee percentage.