Disclaiming Loyalty: M&A Advisors and Their Engagement Letters

19 Pages Posted: 19 Jun 2015

See all articles by Andrew F. Tuch

Andrew F. Tuch

Washington University in St Louis - School of Law; European Corporate Governance Institute (ECGI)

Date Written: June 17, 2015


Are investment banks fiduciaries of their merger and acquisition clients? If not, what rules, if any, constrain the conflicts of interest M&A advisors may face when advising their clients? These questions are rarely asked but central to the regulation of investment banking activities. In their article Bankers and Chancellors, 93 TEX. L. REV. 1 (2014), Professors William W. Bratton & Michael L. Wachter contend that M&A advisors effectively contract out of fiduciary duties in their client engagement letters, “emerg[ing] in practice as arm’s-length counterparties constrained less by rules of law than by a market for reputation.” They also regard recent Delaware decisions, namely, Del Monte, El Paso, and Rural Metro, as requiring directors to “treat the banker like an arm’s-length counterparty, assuming self-interested motivation on the banker’s part and using contract to protect [the corporation] and its shareholders.” In this Response to Bankers and Chancellors, I argue against each of these conclusions by pointing to the narrow operation of informed consent in engagement letters and to the unique role of fiduciary doctrine in protecting clients’ interests.

Keywords: Investment banking, conflicts of interest, mergers and acquisitions, disloyalty, financial advisors, fiduciary duties, informed consent, fiduciary waivers, engagement letters, Delaware law, Del Monte, El Paso, Rural Metro, conflicts of interest, M&A

JEL Classification: K10, K22, G20, G21, G24, G34

Suggested Citation

Tuch, Andrew F., Disclaiming Loyalty: M&A Advisors and Their Engagement Letters (June 17, 2015). 93 Texas Law Review See Also 211 (2015), Washington University in St. Louis Legal Studies Research Paper No. 15-06-02 , Available at SSRN: https://ssrn.com/abstract=2619806

Andrew F. Tuch (Contact Author)

Washington University in St Louis - School of Law ( email )

One Brookings Drive
Saint Louis, MO 63130
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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