Engagement Letters

I. INTRODUCTION.

One of the first steps most companies will take in connection with a potential capital raising or merger and acquisition transaction, or in connection with their consideration of a financial restructuringor their strategic alternatives generally, is the engagement of an investment banking firm. Too often, however, this important first step in a company’s exploration of strategic or financial alternatives is viewed as a perfunctory exercise involving the execution of a largely standard form prescribed by the investment banking firm to which changes are rarely made. In fact, the failure to carefully review and tailor an investment banking engagement letter to the particular situation facing, and the specific goals of, the client company presents significant risks not only to the client company but also to the investment banking firm notwithstanding their carefully proscribed standard form. As this paper will illustrate, the failure to devote an adequate amount of time and energy upfront in negotiating and drafting specifically tailored...