Can a success fee be paid to an investment bank even after termination of their agreement?

A success fee refers to the compensation an investment bank receives contingent upon the successful completion of a transaction, such as a merger or acquisition. In many cases, the terms of the engagement agreement between the bank and the client can stipulate that a success fee is payable even if the client terminates the agreement before the transaction is executed.

In certain instances, this could be based on the rationale that the investment bank's efforts have generated value or created opportunities for the client, which may lead to a transaction occurring even after the formal termination. Additionally, if the investment bank has introduced a potential buyer or seller, the client might still proceed with that party, thus justifying the payment of a success fee.

While the specifics can vary based on the terms agreed upon in the contract, the general understanding is that there is potential for a success fee to be applicable after termination if there is a basis for it within the agreement or prevailing industry practices. This flexibility highlights the negotiations that can take place in contractual arrangements and the need for clear terms outlining the conditions under which fees are warranted.