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The M&A Legal Mistake That Costs Operators Millions (and No One Talks About)
Most operators bring in a lawyer after they’ve hired the banker. On paper, that seems efficient: banker kicks off the process, lawyer handles the docs. Church, and state.
But in practice, you’ve already given up leverage.
The lawyer isn’t there to solely protect your interests vs the acquirer. They also are there to promote your interests vs the bankers.
I’ve made this mistake. So have other smart operators I know.
You sign an engagement letter, get a banker running, and by the time legal gets involved, the structure is already locked. Terms that sounded harmless at the start… fees, tails, carve-outs… turn into multi million dollar surprises later.
I spoke with two experienced M&A lawyers on my podcast, Trey O’Callaghan (Goodwin Procter) and David Siegel (Grellas Shah). They’ve advised on hundreds of tech and PE-backed deals. Their advice was consistent and clear:
“I’ve never seen a banker engagement letter I didn’t want to mark up.”
— David Siegel, Grellas Shah
Here’s what you’re missing.
The Illusion of Standard Terms
“Most founders or CFOs don’t know what’s market—and the bankers are counting on that.”
— David Siegel, Grellas Shah
One of the biggest myths is that these letters are standardized. They’re not.
Trey added:
“The engagement letter is one of the most overlooked—but most important—contracts in the whole deal.
It defines the economics, the timeline, and how hard the banker actually works for you.
— Trey O’Callaghan, Goodwin Procter
The engagement letter is a contract, not a formality. The document governs the economics and incentives of the entire process. Yet most execs treat it like boilerplate.
“People assume it’s boilerplate. But every single clause—tail terms, exclusivity, fee triggers—is negotiable. And you better believe the banker’s lawyer took the time to draft it in their favor.”
— David Siegel, Grellas Shah
You’re not just agreeing on fees. You’re agreeing to
How long they get paid after the process ends
What counts as success
What happens if you refinance instead of sell.
What happens if a buyer shows up two years later and was technically introduced during diligence.
“There are structures where you end up paying a banker for a deal they didn’t even bring to you. Because technically, the acquirer showed up during the tail period.”
— Trey O’Callaghan, Goodwin Procter
Legal can flag and negotiate those risks before they become horrible deal math.
What’s Actually Negotiable (That Most People Miss)
Some examples Trey and David flagged:
Tail clauses that last 24+ months
“I’ve seen tail clauses that extend 36 months and still trigger because someone sent a calendar invite.
That’s not theoretical; that’s happened.”
— Trey O’Callaghan, Goodwin Procter
“Liquidity event” definitions that include secondary sales or recaps
“Efforts clauses” that give the banker broad latitude, but minimal accountability
Fee triggers on debt raises, even if you brought in your own lender
“You do a recap with a lender you brought in yourself, and suddenly the banker wants a cut? It’s in the fine print.”
— David Siegel, Grellahs Shah
Exclusivity that restricts direct conversations you’re already having
Once that letter is signed, there’s no recourse. You’ve established the rules of the game.
“They’re not going to come back and renegotiate this with you later. You signed it. That’s the leverage.”
— David Siegel, Grellahs Shah
And a good lawyer won’t just tweak the language; they’ll help you define what success looks like, and make sure your banker is actually incentivized to get you there.
Look Both Ways Before Crossing the Street
If you're heading into a process (even thinking about bankers) get your lawyer involved up front. Not when the LOI is on the table. Not when diligence starts.
Before you sign anything.
“The engagement letter should reflect the actual job you’re hiring the banker to do.
But too often, it’s written as if they’ve already done it.”
— Trey O’Callaghan, Goodwin Procter
You’ll avoid paying fees you shouldn’t. You’ll preserve options. And you’ll make sure the people working for you are actually aligned with the outcome you want.
“These aren’t dumb founders or weak CFOs—it’s just not where they’re trained to look.
But once the letter’s signed, it’s too late.”
— David Siegel, Grellahs Shah
TL;DR: Red Flags Your Lawyer Will Spot
Success fee applies to any transaction—even if you source it
Definitions of “Introduced Parties” are overly broad
Tail period extends >12 months
No carve-outs for ongoing strategic conversations
Banker still gets paid if you raise debt, not just equity or sell
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