A right of first refusal (ROFR) is a contractual agreement that gives its holder the first chance to purchase an asset or enter into a business transaction before allowing others to get involved. As a result, the holder is not worried about losing their rights to the asset if other bidders or investors come along and express interest in the asset.

The ROFR gives its holder the very advantageous opportunity of transacting with the other party first, meaning that the holder can control the conditions or terms of the agreement. For instance, a real estate owner can grant the holder of the right of first refusal (ROFR) the right to purchase their parcel of land if the owner decides to sell it. This means that the ROFR holder can preempt any potential buyers and negotiate a purchase before any other parties are even aware of the sale.

In addition to the right to make an initial offer, the holder of the ROFR also has the right to match any subsequent offers that are made. If the original owner of the asset decides to solicit additional offers, they can’t accept any offers unless the holder of the ROFR first rejects the offer. This clause protects the ROFR holder from being outbid by competitive offers and makes the agreement generally more advantageous for its holder.

The GROF can be a very beneficial agreement for both parties, as it gives the holder assurance that the asset will be in their possession and the original owner receives a guarantee of a sale, provided that the holder of the ROFR agrees to the price offered.

While the ROFR is a very beneficial agreement for the holder, there are also some drawbacks. The ROFR limits the potential profits of the owner as they are unable to take third-party offers into consideration before the ROFR holder makes their offer. Furthermore, the holder of the ROFR typically requires a longer time period to come to a final agreement than third-party offers would.

The benefits and drawbacks of the ROFR depend largely on the agreement made between the two parties. A well-negotiated agreement can be beneficial to both parties and ensure that the asset is transacted in the most fair and profitable way possible.