What happens when a retained sell-side company does not sell, even after an exhaustive marketing process? Well, the first thing is denial. Every company is wanted by someone, right? No exactly. Then the client terminates the agreement.
The investment bank (IB) is required to support a list of qualified, potential buyers that were solicited. Usually, supplying that list is perfunctory. However, in their frustration, some clients want to significantly narrow that list so the next banker is not restricted in their efforts to sell the firm. At some point the list is agreed upon, meaning that the "tail" period begins. The parties or named potential buyers are proprietary to the original investment bank for some period, usually 12 to 18 months. In essence, if the next banker finds the ultimate buyer and that buyer is on the protected tail list, the first IB receives whatever transaction fee he negotiated in the original contract.
It can be very difficult for IB number 2 to sell the company. First, it was exposed to a wide-ranging market of contacts. Second, it "appears" as if the merchandise is used or damaged. For these reasons, most IB's will not take on failures to launch, especially if they know the reasons for the failure. Perhaps the issues germane to the seller are insurmountable.