Guide
The tail clause: paying a fee after the mandate ends
Updated
The clause most likely to produce a dispute is the one sellers skim, because its consequences arrive after the relationship is over. A tail keeps the success fee alive after the mandate ends, and whether it is fair depends entirely on two details.
Talk to a specialist Lehman and Double Lehman at your deal size, with the minimum fee, the retainer credit and the tail that decide what you actually pay.
What a tail is for
It stops a seller terminating the mandate the week before signing and closing with a buyer the advisor introduced. Without one, every mandate would carry that risk and no firm could invest in a process.
So a tail is not predatory. It is the mechanism that makes a success-fee model workable, and a seller asking for none at all is asking the advisor to work uninsured.
The two details that decide fairness
Length, and scope. A tail of twelve months is ordinary; twenty four is long; anything open-ended should be refused. The scope matters more: a fee should be payable on buyers the advisor actually introduced, named on a written list delivered at termination, not on any buyer in the world.
The named-list version is the single most valuable amendment a seller can make to a standard engagement letter, and it is usually accepted because a firm that ran a real process can produce the list without difficulty.
How it interacts with a second advisor
If you terminate and appoint someone else, the tail can leave you owing two success fees on one transaction. That is the scenario the named list prevents: the second advisor's buyers are not on it.
Before appointing a replacement, read the previous tail and hand the list to the new firm. A good one will ask for it unprompted.
Where the deal closes late
Processes stall and restart. A buyer who passed in March can return in November with new financing, and whether that is a tail buyer or a fresh introduction is exactly the kind of question that gets expensive.
Settle it at signing: agree that a buyer's inclusion on the list expires with the tail, and that a re-approach after expiry is not covered. Both sides can live with that, and neither can live with arguing it at completion.