An investment banker engagement letter is a critical document that formally establishes the relationship between an investment bank and a corporate client. It outlines the scope of services, terms of compensation, confidentiality, and other key provisions that will govern the engagement. With the surge in M&A activity and companies seeking investment banking services, understanding what an IB engagement letter entails and having a template to work from can streamline onboarding.
Overview of purpose and key elements
An investment banker engagement letter generally serves to set expectations, ensure legal protections for the bank, and align on scope of work, term length, and fees. Key elements tend to include the specific services to be provided, term sheet parameters, payment structure, expense policy, confidentiality, termination rights, governing laws, liability and more.
Sample outline and key sections
A sample IB engagement letter template will commonly contain sections such as: Introduction summarizing purpose of engagement, Services to be provided by the bank, Term length such as 6 months or 1 year, Compensation/fees such as retainer, success fee percentage, cap, Travel and expenses policy, Confidentiality and information rights, Indemnification, Jurisdiction / choice of law, Authorization signatures, Contact details schedule.
An investment banker engagement letter serves as a necessary legal agreement governing the client-advisor relationship. Becoming familiar with common provisions and having a Word doc template can allow companies to efficiently onboard advisors.