Go-Shop Period
Candlefocus EditorThe no-shop provision gives the initial bidder a degree of protection against competing offers. This is because they are the ones making the initial offer, and they are not given the opportunity to match offers made by other potential buyers. However, the bidder can still match any competing bids, and the company is generally paid a breakup fee if it accepts a higher offer from another bidder.
Go-shop periods can be beneficial to both sides of the merger, as they provide an opportunity for the acquirer to get the best possible deal and for the company being acquired to shop itself for a better deal. This increases competition and reduces the risk of an underpriced acquisition. It also allows the company being acquired to have some degree of control over the transaction, as it can reject offers made by potential buyers.
In addition to providing an opportunity for better pricing and terms, go-shop periods can also be useful in keeping communications open with potential buyers. They can provide a forum for interested buyers to pursue the transaction and make alternative offers, allowing the company being acquired to have multiple interested buyers.
Go-shop periods have become increasingly popular as a way for companies to maximize the value of their company. While there are potential risks for the company being acquired, such as potential underpriced offers, go-shop periods provide an opportunity for more competitive offers. It also allows the company to maintain some degree of control over the transaction, as it can reject any bids which are not beneficial.