2. Confidentiality clause: Generally speaking, before an investment bank assists its clients to handle specific affairs and enter into a transaction, the clients will often ask them to sign a special confidentiality agreement, and make detailed stipulations on the use and confidentiality responsibilities of confidential information. Confidentiality clauses in employment agreements are often relatively simple. At this time, there are generally two ways to deal with it: first, it is not dealt with in the employment agreement, and the confidentiality rights and obligations are directly introduced into the previously signed confidentiality agreement; The second is a brief explanation, but the matters not involved are handled according to the signed confidentiality agreement.
Third, the definition of transaction in the employment agreement should be as narrow as possible: because the definition of transaction is directly related to remuneration, from the customer's point of view, the definition of transaction should be narrow rather than wide, and it should be noted that the same transaction meaning cannot cover different types of transactions; The author once participated in an M&A project. When the target company introduced the financial adviser, the definition of the transaction was too broad, which led to the financial adviser having the trouble of recourse after a different transaction was completed.
Fourth, whether the payment method is clear: monthly remuneration or lump sum payment or only success fee or compensation for miscellaneous expenses when unsuccessful, and whether there is a "tax package clause" (that is, the investment bank collects net remuneration, and the tax burden must be borne by the customer). If there is no "tax package clause", the investment bank should be required to exempt the customer's tax burden, and the customer should be "withheld and remitted" according to relevant tax laws and regulations.
Fifth, the calculation method of "successful transaction payment": it is necessary to be clear whether it is based on the transaction amount or the price, and there are many flexible ways. For example, if the customer is a seller, if the investment bank sells more money on the base price, it will be rewarded on the basis of selling more, and some customers will be penniless if the transaction is unsuccessful.
Sixth, fair opinions: from the perspective of the responsibility of company executives, customers generally ask investment banks to issue "fair opinions" on the transaction price to the company's board of directors, but some investment banks often strongly resist this. Even if the transaction is completed, he is unwilling to issue a fair opinion. It is very important for the company to get "our opinion is that the consideration paid by the company in this transaction is fair from the financial point of view" from the investment bank, which can protect the board of directors and senior management of the company to a great extent. Although investment banks often add "limited by the above contents" in the previous sentence, the above contents are generally routine contents such as some assumptions leading to conclusions and no self-verification information.
Seventh, there is no reason to arbitrarily dismiss: ordinary customers will demand the right to dismiss without reason in advance, but investment banks often demand the same right. For customers, investment banks are generally not given the right to terminate without reason. Negotiations on the right to dismiss often focus on whether the right to dismiss requires reasonable reasons and prior notice.
Eighth, the final clause: Generally speaking, after the termination of the employment relationship, the investment bank will ask the customer to pay the success fee or related fees within a certain period of time. For customers, the shorter the final terms, the better.
Ninth, the priority of follow-up financing: investment banks generally require the priority of follow-up financing in the employment agreement of M&A transactions, and whether to grant such rights is generally determined by the business. From the lawyer's point of view, if this right is granted by the merchant, we should consider adding restrictions such as "market competition rate".
Tenth, advertising terms: in the employment agreement, investment banks generally require that the description of the transaction can appear in their advertisements or promotional materials after the transaction is successful. From the customer's point of view, the scope and content of advertising, as well as the degree of disclosure of relevant transaction information, all require the company's prior written consent.
Eleventh, the terms of the relationship between the investment bank and its self-operated department and research department in the transaction: Can you recommend other customers to buy the shares of the company or the target company? Can the target company's rating not affect mergers and acquisitions? Do you agree to independence in the agreement? These problems need to be involved. Clients should generally require strict firewalls between professional teams of investment banks to avoid the disclosure of inside information and pay attention to conflicts of interest.
Twelfth, compliance clauses: compliance concerns in the financial industry are generally serious, so investment banks often add many compliance statements, guarantees and liability clauses to employment agreements. From the perspective of China customers, generally speaking, investment banks should not agree to add unfamiliar regulations on financial supervision in the United States and the European Union, unless there are specific reasons, and should consult experienced legal advisers or external lawyers, and generally should request reciprocal applications.
Thirteenth, exemption clause: the limitation of investment bank liability may be one of the most important issues for both parties in the employment agreement. Generally speaking, investment banks will have corporate policies, such as how much responsibility they can bear (for example, the service fee charged is the upper limit). However, from the customer's point of view, if the customer makes a wrong decision with the work results that do not conform to the industry practice, then the customer should have the right to claim more losses. In this case, the two sides often make compromises. For example, customers can get higher compensation for the points they are most concerned about (often there is an upper limit, and different professional consulting institutions have their own internal policies), but it is really difficult for customers to ask investment banks for more compensation for the work results provided according to industry practices without gross negligence or intentional behavior. From an economic point of view, in exceptional cases such as fraud, external professional consultants bear limited responsibilities to customers, which is in line with the principle of "deep pockets". In economics, whoever has deeper pockets is more capable of taking responsibility. From the perspective of total social income, it is beneficial to the whole society and economic interests to allocate risks to the party with deeper pockets.