Definition
A no-shop clause is a provision in a merger agreement that prohibits the target from:
- Soliciting alternative acquisition proposals
- Providing diligence information to other bidders
- Engaging in substantive negotiations with other parties
Almost always paired with a fiduciary out that allows the board to respond to unsolicited superior proposals (subject to matching rights and a break-up fee).
Why it matters
The no-shop is the bidder’s deal-protection backbone. It locks the target into the deal between signing and closing, reducing the risk that a topping bid emerges and consummates instead.
Standard architecture
- Strict no-shop with a fiduciary out
- Notification + matching rights for the original bidder
- Break-up fee (typically 2–4% of deal value) payable if the target accepts a superior proposal
Distinction
A go-shop clause is the opposite — it gives the target an active window after signing to actively solicit competing bids.