The agreement governing the relationship between the seller and the advisory firm guiding them is generally referred to as a "mandate" (mandat). This terminology is technically improper if we refer to the legal definition of a mandate: a contract by which one person grants another the power to perform one or more legal acts on their behalf. However, in this case, the seller must retain control over the transaction. The advisory firm's role is strictly limited to identifying potential counterparties and advising the seller at every stage of the sale process. For this reason, it is preferable to use terms such as "advisory engagement" (mission de conseil) or "assistance engagement" (mission d'assistance).
The advisory engagement must define the respective roles of each party as clearly as possible.
The advisor commits to:
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Valuing the business using standard methodologies while accounting for the company's specific characteristics;
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Preparing a presentation dossier (Information Memorandum or Infomemo) as well as a non-confidential teaser (Blind Profile);
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Identifying prospective buyers, approaching them discreetly, securing non-disclosure agreements, and organizing interactions between prospective buyers and the client, particularly site visits;
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Defending the client’s interests throughout all negotiation stages and coordinating the contributions of other advisors (legal, tax, accounting, etc.) involved in specific aspects of the transaction.
The client commits to:
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Keeping the advisor informed of any new event likely to impact the company's presentation;
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Determining a target negotiation price range by mutual agreement with the advisor, based on the established valuation;
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Not rejecting solid offers made within the agreed price range;
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Keeping the advisor informed of any contact with existing or potential counterparties, with the option to request the advisor’s assistance in any negotiations with them.
The advisory engagement must be time-bound so that the client can engage another intermediary if dissatisfied. The duration can vary depending on the level of trust between the parties, though several months—or even up to a year—are typically required for a business sale to reach a successful conclusion. A tacit renewal clause is usually included to avoid disrupting the engagement while discussions are ongoing. To protect the advisor's work against unreasonable termination, it is customary to stipulate that the success fee remains payable if a transaction closes within a specified period after the contract ends with counterparties introduced by the advisor.
Exclusivity is often a sensitive issue. Some sellers feel they should not pay the advisor if the buyer was identified by the seller themselves, drawing an analogy with real estate sales where exclusivity is not always standard. However, selling a company is a fundamentally different process from selling real estate, and exclusivity makes total sense here. The advisor's role is far broader, as highlighted by the scope of tasks listed above. Without exclusivity, it is virtually impossible for the advisor to maintain confidentiality, foster competitive tension among buyers, or dedicate the full commitment required for a successful transaction. If the advisor is compensated for one candidate but not another, it inevitably creates aligned-interest distortions for both the client and the advisor. On the contrary, the seller and their advisor must act as a unified team for the deal to run smoothly.
To account for the reduced effort required when the buyer is identified by the seller, it can be useful to provide for a reduced fee (for instance, a discount on the success fee) in that specific scenario. It is essential that the advisory engagement remains balanced and respectful of both parties so that the sale process can proceed under the best possible conditions. Client and advisor must form a true partnership in which each plays their designated role. Trust, respect, loyalty, and transparency are the keys to a successful business transfer.
Illustration: Clou
