"Go shop" and "no shop" clauses
What is a "go shop" clause?A "go shop" clause is a clause included in a letter of intent or other document related to an M&A transaction that allows the Seller to continuing looking for other bidders after accepting a bid from a bidder. Unlike its more common counterpart (a "no shop" clause), a "go shop" clause is used by a Seller that wants to accept a bid from a potential buyer, but still have a period of time in which to try to find another, higher bidder. Understandably, "go shop" clauses are popular with the shareholders of Sellers that use them.
What is a "no shop" clause?A "no shop" clause is a clause included in a letter of intent or other document related to an M&A transaction that prevents the Seller from shopping for or accepting another bid. Buyers justify these clauses because, once a letter of intent is signed, they expend considerable time, money and effort to conduct due diligence on the Seller. "No shop" clauses are quite common in M&A transactions.