Definition
The sales mandate is the contract by which a manager entrusts an investment bank or an M&A advisor with the mission of supporting him in the partial or total sale of his company. It formalizes the objectives of the operation, the scope of the mandate (valuation, search for buyers, negotiation), as well as the financial conditions of the advice, generally structured around a success fee and sometimes a retainer initial.
Why is the sales mandate crucial?
- Alignment of interests : it sets a clear framework between the transferor and the advisor, ensuring a convergence of objectives around the price and the transaction conditions.
- Market access : it gives the council the right to approach potential buyers and initiate discussions on behalf of the client.
- Legal protection : it regulates confidentiality, the obligations of the council, and the rights of the seller in monitoring the process.
- Management of temporality : a well-structured mandate defines the duration, the milestones of the process and the deliverables expected at each stage.
Operational issues
- Perimeter clarity : a mandate that is too vague or too broad (multi-activities, subsidiaries not concerned) complicates valuation and execution.
- Duration : often limited to 6 to 12 months, it must reflect the market cycle and the availability of managers.
- Exclusivity : granting exclusivity to advice avoids dispersion, but assumes a high level of trust and reporting.
- Compensation structure : the right balance between retainer (board motivation) and success fee (motivation for success) is decisive.
Sales mandate vs. Purchase mandate
| Appearance | Sales mandate (Sell-side) | Purchase mandate (Buy-side) |
|---|---|---|
| Objective | Sell a company or an interest | Identify and acquire a target |
| Customer | Manager, shareholder, selling fund | Investor, industrial group, buyer fund |
| Valuation | Set a target price goal | Sets a price ceiling or range |
| Process logic | Broad marketing to multiple buyers | Targeted and confidential approach |
| Remuneration | Success fee proportional to the sale price | Fixed retainer or lower fee success |
The future of the sales mandate
The profession is evolving towards mandates more data-drivenintegrating tools for real-time tracking investor contacts, shared reporting and increased transparency clauses. In small and mid-cap, this development transforms the role of the investment banker: from transactional intermediary to financial strategy partnercapable of supporting the manager well upstream of the formal process.
