No-Shop Clause

July 14, 2014  |     |     |   0 Comment

A no-shop clause is sometimes included in an Offer Letter (LOI) between a seller and potential buyer. This clause states that the seller cannot solicit purchase offers from any other party while the buyer and seller are working on closing the transaction.

A potential buyer includes this clause to prevent the seller from using his offer to shop the business around to get a better offer from another buyer. The clause always has an expiration date. After this date, the seller can shop the business around to other buyers.

Therefore, once the seller countersigns the Letter of Intent (LOI), he can only seek offers from other buyers if the no-shop clause has expired and the original buyer failed to close the deal. 

Author: 

Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.

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