A no-shop clause (or no-solicitation provision) prohibits a seller from soliciting, encouraging or negotiating competing acquisition proposals for a defined period. It appears in two places: as the exclusivity commitment inside a letter of intent, and as a more elaborate covenant in the signed definitive/merger agreement (covering the gap between signing and closing). Its function is to give the buyer a protected runway to spend on diligence and legal work without being outbid at the last moment.
What it restricts
A typical no-shop bars the seller and its representatives from:
- Soliciting or initiating competing proposals;
- Encouraging or facilitating an alternative bid (including sharing information);
- Negotiating with another bidder; and often
- Entering any alternative agreement during the period.
The fiduciary-out exception
In deals involving a public-company target, an absolute no-shop would conflict with the board's fiduciary duty to shareholders — the board cannot blind itself to a clearly superior offer. So public merger agreements pair the no-shop with a fiduciary out: the board may respond to an unsolicited "superior proposal" and, after providing the original buyer a matching right, may change its recommendation or terminate — usually triggering a break fee (commonly ~1–4% of deal value) payable to the jilted buyer. This balances deal certainty against the board's duties and is frequently litigated in Delaware.
In private deals the seller's board has no such public-shareholder duty, so no-shops are typically harder (no fiduciary out) and break fees less common.
"Window-shop" and related variants
- No-shop — cannot solicit and cannot talk to anyone who shows up.
- Window-shop — cannot solicit, but may respond to a genuinely unsolicited superior proposal (the fiduciary-out posture).
- Go-shop — the seller is affirmatively permitted to solicit better offers for a short post-signing window.
Why it matters
The no-shop is the legal backbone of deal certainty. For the buyer it converts an expensive, uncertain pursuit into a defensible exclusive negotiation; for the seller it is the concession that secures the buyer's commitment but caps the seller's ability to keep improving the price. The hardness of the no-shop, the size of any break fee, and the breadth of any fiduciary out are among the most negotiated points in the definitive agreement.
See also
- Exclusivity — A binding period (usually 30–90 days) within an LOI during which the seller agrees not to negotiate or accept competing offers, while the buyer completes diligence.
- Go-shop clause — An exception to a no-shop that allows the seller to actively solicit competing offers for a short window after signing — common in some PE-led public deals.
- Letter of intent — A preliminary document outlining the main terms of a proposed deal, mostly non-binding.
- Definitive purchase agreement — The binding contract that governs an acquisition and its terms.
- Fairness opinion — A formal written opinion from an investment bank that the consideration in a proposed deal is fair, from a financial point of view, to a specified group of shareholders.