It is not uncommon for a company to switch financial advisers when it is seeking to do a deal, but doing so without a full appreciation of the implications of the contract with the financial advisers who have been shown the door can be an expensive mistake.
In a recent case, financial advisers who had ceased to be engaged in a deal saw the deal progress to completion several months later, without their involvement. Regrettably for their former client, their contract contained a crystal-clear clause which read ‘In the event the engagement pursuant to this letter of engagement is terminated by the Company and an Offer for the Target is declared or becomes wholly unconditional as the result of any offer made by or in association with the Company within a period of 12 months after the effective date of termination the Company shall pay…the Success Fee in full’.
In spite of a spirited attempt to avoid paying the success fee, and despite the clear lack of commerciality of the contract, the court had no hesitation in awarding the advisers their fee. Presumably, the new advisers obtained their success fee also.