Why most mandates don't close (and the few that do)

I keep informal records on the mandates I have been involved in over thirty years. The records are not formal — I am not running a study and have no intention of publishing aggregate numbers — but the pattern of which mandates closed and which did not is, after this long, more consistent than is comfortable to acknowledge. The great majority did not close. A meaningful minority did. The factors that distinguished the two categories were not the factors that the published commercial wisdom of the trade would have predicted, and the lessons from the pattern are the most important I have learned in the work.

The headline pattern

If I were forced to give a number, I would say that of every ten mandates I have engaged on with serious intent, fewer than three have closed on terms that produced the commercial outcome the parties were seeking. The remainder have failed at various points along the way, for a recognisable set of reasons that I will set out below. This ratio is, in my observation, broadly typical of the trade rather than specific to my own work, and the originators who claim materially better numbers are, in many cases, counting differently from the way I am counting.

The honest framing of this work is therefore that most engagements do not produce a commercial outcome, and the originator who is going to be successful over decades has to be able to operate within that reality without becoming demoralised or, worse, becoming undisciplined in the engagements that follow.

The reasons mandates do not close

The reasons are several, and the relative frequency of each is fairly stable across the engagements I have observed.

The counterparty was not as advanced as the deck claimed. This is the most common single failure mode and is the one the ground-truth-versus-deck-truth framing addresses. The mandate proceeds on the basis of the deck description and is abandoned, often months in, when the underlying ground reality emerges. The cost in wasted time and credibility is substantial, and most of it is avoidable through disciplined diligence at the front of the engagement.

The capital was not as committed as the introduction claimed. The mirror image of the previous failure mode. An introduction is made to a capital source that is described as having appetite for the deal type, and the capital, when properly engaged, turns out to have a different mandate, a longer process, or a different leadership view than the introduction implied. This failure mode tends to be diagnosed earlier than the counterparty mismatch but still consumes meaningful time.

The political environment shifted. A defined subset of mandates fail because the political environment in the relevant jurisdiction changes during the engagement in ways that materially alter the project economics or the regulatory approvals required. This failure mode is largely outside the originator's control, but the originators who track the political environment carefully are better placed to anticipate the shifts and adjust the engagement accordingly.

The relationship between the principal parties broke down. The deal flow depends on relationships that, in any extended engagement, are tested by the predictable frictions of negotiation, due diligence, and the inevitable points at which one side has to ask the other for something the other does not want to provide. The relationships that hold through these frictions produce closed deals; the relationships that break under them produce abandoned mandates. The factor that distinguishes the two is more often the personal qualities of the principals than the substantive merits of the deal.

The documentation could not be reconciled. A subset of mandates fail because the documentation that the parties on each side require cannot be reconciled within an acceptable timeframe. This is sometimes a substantive issue — different jurisdictions have different requirements that genuinely cannot be met simultaneously — and sometimes a procedural one — different counsels have different drafting traditions and the parties cannot agree on whose conventions to follow. The originators who can navigate the documentation reconciliation themselves have an advantage; the ones who outsource it entirely to counsel often find that their engagements stall in the legal-review phase.

The deal was not what the parties said it was. A small but significant subset of mandates fail because, on closer examination, the underlying transaction is not the transaction that the parties have presented it as. The originators who are diligent in the early stages of an engagement tend to identify this category quickly and to disengage before significant time has been invested. The originators who take the parties at their word for too long find themselves deep in engagements whose underlying economics do not support the framing they have been given.

What the closing mandates have in common

The mandates that have closed, in my experience, share a smaller and more consistent set of features than the failing ones do.

The principals on each side were people whose previous track records I knew directly or could verify through people whose judgement I trusted. The counterparty had been engaged before the mandate, often for years, in a relationship that predated the specific transaction. The capital had been raised before the engagement began rather than being assembled in parallel with it. The documentation had been drafted by counsel who had drafted comparable documents before, on terms that the parties had been through previously. The political environment was stable for the duration of the engagement, or the engagement was structured to be insensitive to the political fluctuations that did occur.

The deals that closed, in other words, were the deals where the various structural conditions were met before the engagement began rather than being assembled during it. The deals that failed were the deals where the engagement was the assembly process for those conditions, and where the assembly did not converge before time and patience ran out.

The implications for how to engage

The lessons I draw from this pattern are several, and they have changed how I engage on new opportunities materially over the years.

First, I do considerably more work at the front of an engagement than I did earlier in my career, before I commit material time to the substantive deal work. The diligence on the counterparty, the verification of the capital, the assessment of the political environment, and the early read on the principal-to-principal relationship are all done before I take a formal mandate. The engagements that would have failed on these factors are filtered out before they consume time, and the engagements that proceed are the ones with a meaningful chance of closing.

Second, I take fewer mandates than I used to. The economic framing of this work rewards selectivity. An originator who takes ten mandates of which two close has spent eighty per cent of their time on engagements that did not produce a commercial outcome. An originator who takes four mandates of which two close has spent fifty per cent of their time on engagements that did not produce an outcome, and has had four times as much attention to allocate to each engagement. The reduction in volume tends to produce a more than proportional increase in close rate, and the close rate matters more than the volume.

Third, I disengage earlier when the engagement is not converging. The instinct to persist with a difficult engagement, in the hope that the various structural issues will resolve themselves, is a false instinct in most cases. The engagements that fail tend to fail for reasons that were visible early and that did not improve over time, and disengaging earlier rather than later is the discipline that preserves the time available for the engagements that do close.

Fourth, I treat the failing engagements as part of the work rather than as exceptions to it. The mandates that do not close are not failures in the sense that they reflect badly on the work; they are part of the work, and the originator who does not internalise this finds the rhythm of the trade demoralising in ways that affect the engagements that follow. The discipline of treating the failures as routine, learning the specific lessons from each, and moving on without lingering is among the most important pieces of professional practice in this trade.

The role of the failure record

One of the more useful disciplines I have developed over the years is the habit of writing a short note on every mandate that does not close, after the engagement has clearly ended. The note is for my own purposes; it is not shared with the parties involved and is not intended to apportion blame. It is intended to record what happened, in what sequence, and what the operative reasons were, so that the patterns can be tracked over time and the lessons can be applied to subsequent engagements.

The notes have, over thirty years, accumulated into something resembling a personal failure record. Reading back through them produces a sobering picture of how often the same patterns recur. The same kinds of counterparty diligence failures, the same kinds of capital-source mismatches, the same kinds of documentation reconciliation failures, repeat across decades and across jurisdictions. The specific facts of each engagement are different; the underlying patterns are remarkably consistent.

The discipline of writing the notes is, in itself, useful. It forces a reflection on each failed engagement that the absence of the discipline would allow to be avoided, and it produces a record that is available years later when a similar pattern emerges and pattern-recognition is the relevant tool. The originators I have known who have done this consistently are, in my reading, the ones who have improved most over their careers. The ones who have not done it are the ones who, fifteen years in, are still making the same mistakes they made in their first five years.

What the closing rate implies for fees

One practical consequence of the realistic closing rate is for fee structure. An originator whose engagements close at the rate I have described cannot, economically, work on a contingent-fee-only basis at the level of compensation that the work warrants. The arithmetic does not support it. Either the contingent fee on the closing engagements has to be substantially higher than is conventional, or the engagements have to include a fee element that compensates for the non-closing work as it occurs.

The originators who have built sustainable practices have, in most cases, moved over time toward a hybrid structure that includes a mandate retainer or engagement fee in addition to the contingent close fee. The retainer compensates for the work that does not produce a close, and the close fee compensates for the substantive value delivered when the work does. Counterparties who understand the realistic closing rate accept this structure. Counterparties who do not understand it sometimes resist it, and an originator considering whether to engage with such a counterparty has a useful early signal in the pushback.

A closing observation

The trade is, in some sense, a study in how to operate productively in conditions where most of what you do does not produce the outcome you were aiming at. The originators who survive in it for decades are the ones who have made peace with this reality and have built their working practices around it. The ones who have not made that peace tend to leave the trade within their first decade, or to remain in it but in declining quality of engagement. After thirty years, my own provisional summary is that the work is worthwhile precisely because the few mandates that do close produce outcomes that justify the discipline required by the many that do not. Both sides of that observation are necessary to make sense of the trade as a whole.