No-Shop Clause
A contractual provision in an M&A agreement that restricts the seller from soliciting, encouraging, or engaging with competing acquisition proposals during a specified exclusivity period after accepting a buyer's offer.
What Is a No-Shop Clause?
A no-shop clause — also called an exclusivity provision or non-solicitation agreement — is a contractual restriction that prevents a seller from actively seeking or engaging with alternative acquisition offers after entering into an agreement (typically an LOI or definitive agreement) with a preferred buyer.
The clause protects the buyer’s investment of time, resources, and deal costs during the final phase of a transaction — a critical stage of the sell-side M&A process — by ensuring the seller is not simultaneously shopping the deal to other parties.
How No-Shop Clauses Work
Once a no-shop clause is in effect, the seller is typically prohibited from:
- Soliciting competing proposals — actively approaching or encouraging other potential buyers
- Providing information to competing bidders — sharing confidential information or data room access
- Engaging in discussions or negotiations with alternative buyers
- Entering into agreements with other parties for the sale of the company
The clause is binding for a specified period — typically 30–90 days in the context of an LOI, or from signing through closing in a definitive agreement. Understanding where no-shop provisions fit within the broader M&A process is essential for both buyers and sellers.
No-Shop vs. Go-Shop
In some transactions, particularly those involving public companies or private equity-backed sales, a “go-shop” clause replaces or supplements the no-shop provision:
| No-Shop | Go-Shop | |
|---|---|---|
| Seller’s obligation | Cannot seek competing offers | Actively encouraged to seek competing offers for a limited window |
| Duration | Entire exclusivity/signing-to-closing period | Typically 30–45 days post-signing |
| Rationale | Protects buyer’s exclusivity | Ensures the board has satisfied its fiduciary duty to seek the best price |
| After window expires | N/A (already in effect) | Converts to a no-shop for the remainder of the period |
| Common in | Private transactions, LOIs | Public company transactions, PE take-privates |
Fiduciary Out
Even in transactions with strict no-shop provisions, boards of directors retain a “fiduciary out” — the right (and obligation) to consider unsolicited superior proposals if failing to do so would breach their fiduciary duties to shareholders.
A typical fiduciary out provision allows the board to:
- Receive unsolicited proposals (the no-shop prevents solicitation, not receipt)
- Determine whether the proposal could reasonably be expected to lead to a “superior proposal”
- Engage with the competing bidder if the board concludes in good faith (usually after consultation with legal and financial advisors) that the proposal is or could become superior
- Terminate the existing agreement in favour of the superior proposal, typically subject to payment of a break-up fee
Break-Up Fees
No-shop clauses are often paired with break-up fees (also called termination fees) — payments the seller must make to the buyer if the deal is terminated in favour of a competing offer:
- Typical range — 1–4% of the transaction’s equity value
- Purpose — compensates the buyer for deal costs and the opportunity cost of exclusivity
- Deterrent effect — makes it more expensive for a competing bidder to disrupt the deal, as the premium they must offer must exceed the break-up fee. These deal protection mechanisms are a standard part of the negotiation toolkit
No-Shop Clauses in Asia Pacific
No-shop provisions in Asia Pacific M&A transactions largely follow international norms, but enforcement and cultural dynamics differ. In Japan, the concept of exclusivity is reinforced by relationship norms — walking away from an agreed deal carries reputational consequences beyond legal liability. In Australia, no-shop and no-talk provisions in public company schemes of arrangement are subject to regulatory scrutiny and must be structured to comply with Corporations Act requirements. AI-driven platforms like Amafi help advisors manage competitive processes and timeline commitments across the region’s diverse legal frameworks.