Non-exclusive mandate, whereby the Issuer is free to retain the
services of other EMD’s during the term of the Engagement
Letter, but the EMD will only be compensated on a success basis
for those investors for whom it is either the procuring cause and
who are not identified on the Protected List and compensation
will also flow for those investors who are specifically identified on
the Protected List (the Protected List usually being appended to
the Engagement Letter).
A slight variation to the foregoing is called the Limited
Protected List mandate, which does not confer any mandate on
the EMD other than to solicit those investors specifically identified
on the Protected List.
This type of mandate is often used to bridge the gap where
the EMD has no pre-existing relationship with the Issuer, is
approaching the Issuer for a mandate because the EMD believes
it can source funding from a specified investor and the Issuer is
leery to confer a mandate on the EMD, other than a limited one
to approach the EMD’s specified investor(s) on the Protected List.
In all circumstances, whether Exclusive, Non-Exclusive,
Non-Exclusive with Protected List or Limited Protected List, best
practice dictates that the nature of the mandate be clearly set out
in writing in the Engagement Letter. Do not leave it vague and
specifically use the terminology in the Engagement Letter that
references “exclusive”, “non-exclusive” or “non-exclusive with a
Protected List and the like. In addition, it is important to make
sure the Engagement Letter is internally consistent as between the
nature of the mandate (i.e. exclusive/ non-exclusive or protected
list) and the other sections of the agreement, especially the EMD’s
In our experience, unsophisticated or first-time Issuers
sometimes just assume that a non-exclusive engagement is
necessarily in their best interests and try at the outset of the
negotiation of the Engagement Letter to resist an exclusive
engagement - this on the theory that a non-exclusive
Engagement provides the Issuer more flexibility in terms of
allowing the Issuer, should it decide, to engage more “feet on
the street” to raise capital through various EMD’s simultaneously.
I believe this is an incorrect assumption, which in many cases can
and should be refuted.
Optimal results of a fundraising exercise are typically
achieved by the EMD when (a) the EMD has a proven track record
of raising capital in the Issuer’s particular industry domain (i.e.
mining, high tech, manufacturing, biotech etc, etc) and (b) the
EMD is in a position to create a professional, co-ordinated and
controlled auction for the investment opportunity.
Nothing could we worse for an offering than the “deal
collision” that results when two different EMD’s approach
the same investor at the same time, or a scattered or shotgun
approach to marketing through uncoordinated efforts is engaged
in, which risks the impression of disorganization at best and
desperation at worst.
Experience teaches that an Issuer and its EMD only have one
chance with a potential investor to make a good first impression
and as such, an uncoordinated, duplicative marketing approach,
which can result from two EMD’s engaged simultaneously, rightly
or wrongly often reflects poorly on the investment opportunity
itself. This should be clearly explained to the Issuer.
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