No-Shop Clause

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What It Means

A No-Shop Clause, also called a Period of Exclusivity, is a contractual obligation for a Seller to not continue to actively shop the company or entertain offers or have conversations with other Buyers for a period of time.

Why It’s Important

No-Shop Clauses are important, but they represent a risk to Sellers. They force a Seller to take the company off the market for a period of time, possibly forgoing other, more attractive offers. Without the protection of a No-Shop Clause and the commitment from the Seller it confers, Buyers may be hesitant to commit the time and resources to Due Diligence that is necessary to complete the process in a timely manner.

Before entering into a binding No-Shop period, all parties should ensure they are aligned on the major structural elements of the deal, including Enterprise Value, Escrow, and the terms of any Seller Financing.

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