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Using a No Shop Clause in a Letter of Intent

February 24, 2007 - Mergers and Acquisitions

If you are buying a business, the process becomes expensive and tedious once the letter of intent is signed. For this reason, I recommend all buyers include a “No Shop” provision in their LOI. This provision prevents the seller from going behind your back and finding other suitors while you are busy with due diligence and financing.

Sellers should find this clause acceptable, but be prepared for them to counter with a time limit for the no shop. The seller doesn’t want to be tied up forever and will hope the time constraint gets you going faster so that the deal won’t fizzle.

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About the Author: Ryan Roberts is a corporate lawyer and advises clients in a wide variety of transactional matters, with an emphasis on startup companies, mergers and acquisitions, and corporate governance. His clients have included companies in the technology, energy, real estate, health care, construction, and retail sectors. Visit his law firm's website.

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  1. Get a Deal Done with a Go Shop Clause | The Startup Lawyer on October 29th, 2007 8:40 am

    […] you typically want to lock down your target and prevent it from seeking other potential buyers (see no shop clause). But in some situations, allowing your target to shop the deal around, under the terms of a […]

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