Resources / Glossary / No-shop clause

No-shop clause.

Aka. No-shop · exclusivity provision · non-solicitation covenant
All terms

What is a no-shop clause?

A no-shop clause is a contractual commitment by a seller to stop actively soliciting, encouraging, or negotiating competing offers for the business during a defined period. It hands the buyer a window of exclusivity in which to complete diligence, finalize financing, and negotiate definitive documents without the risk of being outbid mid-process.

It typically first appears in the letter of intent or term sheet — the point at which a buyer is about to spend real money on legal, accounting, and advisory diligence and wants assurance the seller will not use that work to shop a better price elsewhere. The provision then often carries through into the definitive purchase agreement.

The clause protects the buyer's investment of time and cost. A seller that has signed a no-shop cannot run a parallel auction during the exclusivity window; doing so would breach the agreement.

What a no-shop actually restricts

A well-drafted no-shop covers more than just declining other offers. It usually restricts the seller from:

  1. Soliciting. Initiating or encouraging any competing proposal, or marketing the business to other parties.
  2. Negotiating. Entering into or continuing discussions with any other potential acquirer regarding a sale.
  3. Providing information. Furnishing diligence materials or data-room access to a competing bidder.
  4. Disclosing. In some forms, even informing the buyer if an unsolicited offer arrives — though many no-shops carve out a duty to notify.

The restriction runs for a stated exclusivity period — commonly a matter of weeks, sometimes extendable — after which, if no deal has signed, the seller is free to reopen the field.

No-shop versus fiduciary-out

In public-company deals, a pure no-shop can collide with the target board's fiduciary duties to shareholders. Boards therefore often negotiate a fiduciary-out: an exception that lets the board respond to a genuinely superior unsolicited proposal despite the no-shop, usually paired with a termination fee payable to the original buyer if the seller walks.

In private deals, no-shops tend to be cleaner and stricter, because there is no board acting for a dispersed shareholder base. The practical distinction is between a no-shop, which forbids the seller from seeking other bids, and a go-shop, which deliberately permits the seller to canvass the market for a limited window after signing.

Frequently asked.

4 questions
01 What's the difference between a no-shop and a go-shop?

A no-shop bars the seller from soliciting or negotiating competing offers during an exclusivity window — it locks the process to one buyer. A go-shop does the opposite: it explicitly allows the seller, usually after signing a deal, to actively shop for a higher bid for a limited period.

Go-shops are most associated with situations where a board wants to demonstrate it tested the market even after agreeing to a deal. The two clauses sit at opposite ends of how much freedom the seller retains to look elsewhere.

02 When in a deal does the no-shop appear?

Most commonly in the letter of intent or term sheet, timed to the moment a buyer commits to serious diligence spend and wants exclusivity in return. It often then survives into the definitive purchase agreement to cover the gap between signing and closing.

The exclusivity period is negotiated — long enough for the buyer to finish diligence and financing, but not so long that the seller is locked up indefinitely without a deal.

03 What happens if a seller breaches a no-shop?

Breaching a no-shop is a breach of contract, exposing the seller to damages and, in some structures, a pre-agreed break or termination fee. In public deals the buyer may also seek to enforce the agreement directly.

The practical deterrent is reputational as well as legal: a seller known for running parallel processes after granting exclusivity will find buyers unwilling to spend on diligence in future deals.

04 Does a no-shop guarantee the deal will close?

No. A no-shop only stops the seller from courting other buyers during the window; it does not commit either party to close, which depends on satisfying the conditions in the definitive agreement — diligence, financing, regulatory approvals, and the absence of a material adverse change.

It buys the buyer a clear field to do its work, not a guaranteed outcome.

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