In the last edition of Exempt Market Update, in the article
Engagement Letter Best Practices - Part One, I focussed on
the importance of specifically delineating whether the mandate
is exclusive or non-exclusive in an EMD’s Engagement Letter.
Having discussed the critical reasons for that delineation, there is
another important reason to discuss: what is commonly known in
North America as the “fee-tail” and in Europe as the “tail gunner”.
The fee-tail or tail gunner is, in our experience, one of the least
understood provisions of the EMD’s Engagement Letter and
deserves to be understood in order to have a proper understanding
(and optimal drafting) of the EMD’s Engagement Letter.
The fee-tail or tail gunner, let’s stick to “fee-tail” for now, is a
provision in the EMDs Engagement Letter relating to termination
provisions. Commonly, if an EMD’s Engagement Letter is terminated
by either the EMD or the Issuer, and a transaction is consummated
within the designated “tail period” after termination (typically 12 to
24 months) with a party whom has been “introduced” (more on that
later) by the EMD to the Issuer then the EMD will remain entitled to
its full fees. In essence the fee tail triggers payment to the EMD as
if the EMDs Engagement Letter was never terminated.
By David Brown, EMDA Director and Founding President and Partner at WeirFoulds LLP
Part Two - Introduction to Fee-Tails. What are they?