Publications

Go-Shop Provisions

Fall 2007
Richard A. Presutti | Abraham A. Spira
Private Equity Developments - Fall 2007

While there are many ways for a public company to engage in a sales process, a privately negotiated sale offers advantages to both the buyer and the target company. A privately negotiated sale enables the buyer to avoid the competition based issues associated with an auction, such as having to share access to the target’s management, dealing with a management whose attention is fragmented, and receiving the same diligence information as all other bidders. The target, for its part, may have concerns about the impact that a public auction would have on its business operations and stock price, as well as the possible consequences of announcing its intention to sell itself, especially if the result is a busted auction. To avoid these risks, a target may choose to enter into a purchase agreement without making a prior public announcement of its intention to sell or engaging in an auction, and utilize a “go-shop” provision as a post-signing market check.