Go-shop and no-shop clauses in acquisition agreements
- Graziano Stefanelli
- Sep 1
- 3 min read
In mergers and acquisitions (M&A), go-shop and no-shop clauses are contractual provisions that define what actions a target company can take to solicit or engage with competing offers after signing a definitive agreement. These clauses are critical negotiation tools that influence deal certainty, shareholder value, and competitive bidding dynamics. While go-shop clauses allow the target to actively seek alternative bids for a limited period, no-shop clauses prohibit such solicitations, prioritizing exclusivity with the initial buyer.
Go-shop clauses create flexibility to maximize shareholder value.
A go-shop clause permits the target company to actively solicit competing acquisition offers within a defined period after signing the agreement, typically 30 to 60 days.
Key objectives include:
Driving competitive tension → Encourages other bidders to make higher offers.
Fulfilling fiduciary duties → Boards demonstrate they sought the best value for shareholders.
Testing the market → Assesses whether the agreed purchase price reflects fair market value.
Negotiating leverage → Targets can return to the original buyer with improved terms if stronger bids emerge.
Go-shop provisions are especially common in private equity buyouts, where initial bids may undervalue the company relative to potential strategic buyers.
No-shop clauses secure exclusivity for buyers.
A no-shop clause restricts the target company from actively soliciting competing offers once the acquisition agreement is signed. This benefits buyers by providing:
Deal protection → Prevents the seller from leveraging the signed agreement to obtain better bids.
Reduced execution risk → Ensures management remains focused on closing the signed deal.
Pricing certainty → Encourages buyers to commit higher bids when exclusivity is guaranteed.
Despite these restrictions, many no-shop provisions include “fiduciary out” clauses, which allow boards to consider unsolicited superior proposals to comply with shareholder protection obligations.
Breakup fees influence go-shop and no-shop strategies.
Breakup fees, also called termination fees, are integral to these clauses because they define the financial consequences of accepting a competing bid:
Structuring fees carefully ensures fairness to buyers while preserving the board’s ability to maximize shareholder returns.
Strategic considerations for boards and buyers.
When negotiating go-shop or no-shop provisions, companies evaluate several factors:
Deal certainty vs. valuation upside → Sellers prioritize flexibility, while buyers demand exclusivity.
Competitive landscapes → If multiple potential bidders exist, a go-shop period creates leverage.
Shareholder pressures → Activist investors often favor go-shops to ensure higher valuations.
Private equity vs. strategic buyers → Private equity deals frequently include go-shops, while strategic buyers prefer strict no-shop clauses.
Investment bankers play a critical role in assessing bidder interest and advising boards on whether soliciting competing offers can realistically generate improved pricing.
Regulatory and fiduciary dimensions shape clause negotiations.
Boards must balance contractual protections with fiduciary obligations to act in shareholders’ best interests:
In jurisdictions like the U.S., Delaware courts require boards to demonstrate reasoned processes for obtaining maximum value.
Proxy advisors and institutional investors increasingly scrutinize restrictive no-shop provisions that limit competitive bidding.
Regulators monitor deal protections to ensure provisions do not discourage fair-market competition in sensitive sectors.
Failure to negotiate balanced clauses can expose boards to litigation risk if shareholders claim value was sacrificed for deal certainty.
Examples of go-shop and no-shop provisions in practice.
Dell (2013) → Included a go-shop period allowing rival bids after the initial leveraged buyout, resulting in an increased offer from Michael Dell and Silver Lake Partners.
EMC and Dell (2016) → Used a no-shop clause with fiduciary outs to secure exclusivity while permitting EMC’s board to evaluate unsolicited offers.
Albertsons and Safeway (2015) → Combined a go-shop provision with limited breakup fees to create competitive pressure among bidders.
These examples demonstrate how tailoring provisions to deal dynamics impacts final valuations and transaction outcomes.
Go-shop and no-shop clauses shape competitive dynamics in M&A.
The inclusion and design of these provisions directly influence bidding strategies, shareholder value, and deal certainty. Go-shop clauses favor sellers seeking maximum pricing through competitive auctions, while no-shop clauses appeal to buyers prioritizing exclusivity and protection against interlopers.
Well-structured agreements balance these competing interests, ensuring boards meet fiduciary duties while enabling efficient, competitive deal processes.
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