Using Financial Advisor Engagement Letters to Vet Potential Conflicts of Interest
Financial advisors often are selected by a board of directors (or committee thereof) to advise on a strategic review process because of their role as brokers in the market and their ability to generate transactional activity. Of course, that role and ability is dependent upon relationships with potential counterparties to a transaction. Because financial advisors are hired in part to exploit their relationships with potential counterparties, inevitably conflicts of interest will arise. Delaware law clearly permits directors to make a decision that the benefits of engaging a particular financial advisor (including, in many cases, that financial advisor’s contacts in the market or particular industry) outweigh any potential detriments arising from potential conflicts of interest. That decision, however, must be fully informed.
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Eric S. Klinger-Wilensky, Nathan P. Emeritz, “Using Financial Advisor Engagement Letters to Vet Potential Conflicts of Interest,” The CLS Blue Sky Blog (June 17, 2015)