Bilateral conversations feel efficient: one buyer, one negotiation, no process to manage. The data says they’re expensive. Bilateral deals almost always close 10% to 30% below what a competitive process would have produced.
Why tension matters
When several buyers compete for your business, that competition is your leverage, and leverage is what drives price. You don’t need an auction with fifty bidders to get it. A limited process with four to six strategic buyers and four to six financial buyers is enough to turn any one buyer’s number into one bid among many.
Choosing the banker
Match your banker on four things: the deal size band they actually work in, your sector, their relationships across your likely buyer universe and how engaged the senior bankers will be.
That last one is where I see founders get burned. I call it the pitch deck problem: the senior partner shows up to win the engagement, and then you never see them again. Confirm in writing who will actually run your deal day to day.
The engagement letter
The engagement letter has traps of its own, and each one is negotiable.
Success fee: Is it a tiered rate or a flat percentage at deal-value bands? Know what you’ll pay at each realistic outcome, not just the headline scenario.
Minimum fee, retainers and expenses: Check the minimum fee, whether retainers are credited against the success fee and whether expenses are capped.
What counts as a transaction: The definition decides whether the fee also captures asset sales, recapitalizations, joint ventures or financing-only outcomes. Read it as if the deal you end up doing is not the deal you set out to do.
Exclusivity scope: Know exactly what the banker has exclusive rights over.
The tail: The tail provision lets the banker collect a fee on a deal that closes within a set period after the engagement ends, with a buyer they introduced. Negotiate a list of actual named buyers rather than “any party contacted,” keep the tail to twelve months rather than twenty-four, and tie the trigger to a signed transaction rather than “discussions initiated.”
When bilateral makes sense
There are narrow cases where going bilateral is the right call: a genuine pre-emptive offer at a strong number; a strategic buyer with synergies you can’t replicate elsewhere; or an executive relationship that running a process would actively damage.
Even then, I’d bring in a banker as an advisor to test the offer against the market. A single offer tells you what one buyer is willing to pay. You want to know what the market would pay.
Ahmed Hasan is the founder and CEO of Venture Bridge Law, a corporate and M&A boutique. This article is general information, not legal advice.