An engagement letter (lettre de mission) is the contract between a financial advisor — investment banker, M&A advisor, due diligence firm — and their client, defining the scope of services, fee structure, duration, confidentiality obligations and liability limitations. In M&A and capital markets advisory, the engagement letter establishes the advisor's mandate (sell-side, buy-side, fairness opinion), the success fee calculation basis and trigger conditions, the tail period (during which the fee applies if a transaction closes with an introduced party), and any exclusivity arrangements. It is the foundational document protecting both advisor and client.

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Example: Hectelion's sell-side engagement letter for a CHF 40.0 million Swiss transaction specifies: retainer of CHF 15,000/month, success fee of 2.0% of closing enterprise value (CHF 800,000), 18-month tail period for buyers introduced during the mandate, exclusivity of advisory representation, and a limitation of liability to 2x the total fees paid. The tail period protects Hectelion against transaction interruption and re-launch with an introduced buyer after mandate termination.

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Hectelion structures engagement letters that clearly define advisory scope and fee mechanics — creating aligned incentives between advisor performance and client value creation.