Tag archives: fiduciary out clause

A no-shop provision can be a buyer’s best friend, while exceptions may be the target’s best friend

Deal protections are an important aspect of M&A transactions. Buyers will typically negotiate with the target of the transaction to include all kinds of deal protections mechanisms, including no-shop provisions, matching rights, and break fees payable to the buyer. No-shop provisions in particular restrict the ability of the target board to solicit alternative proposals (including negotiations with third parties) and recommend alternative transactions to shareholders. Receipt of an unsolicited proposal may trigger a notice requirement. However, no-shop provisions can be limited in scope. Three common and interrelated “exceptions” to no-shop provisions are fiduciary out, go-shop, and window-shop provisions. While the … Continue Reading

When and how to use fiduciary out clauses

Almost every acquisition agreement involving the acquisition of a public company will include a provision whereby the board of directors of the target company agrees to stop soliciting competing bids or stop having any discussions with any other party who might be interested in a making a competing bid. This is generally known as the “no-shop” clause. However, the directors of the target company have certain fiduciary duties that they must comply with. Directors must act honestly, in good faith, and with a view to the best interests of the company, which in the context of an acquisition includes getting … Continue Reading

LexBlog