Glossary

No-Shop

A no-shop is a contractual restriction that prevents the seller from soliciting or negotiating with other buyers during a defined period.

Plain definition

What it means.

A no-shop, sometimes called an exclusivity clause or no-solicitation provision, is a contractual restriction that prohibits the seller from soliciting, negotiating, or accepting alternative offers during a defined period. It typically begins at the term sheet stage and runs through signing of the definitive agreement, sometimes extending through closing.

A no-shop usually includes exceptions for unsolicited bona fide offers, sometimes called fiduciary out clauses, that allow the seller's board to consider a superior proposal if it materially exceeds the existing deal terms. The exceptions are heavily negotiated and shape what the seller can actually do if a better offer arrives.

A no-shop is the buyer's reservation of the seller's attention. The exceptions decide what the seller can still do with a better offer.

What goes wrong

The failure pattern this term exists to prevent.

The exclusivity that locked out alternatives

The seller agrees to a 90-day no-shop with no fiduciary out. During exclusivity, the buyer drags out diligence, runs the price down, and modifies key terms. The seller cannot signal to other interested parties because the no-shop forbids it. The exclusivity gave the buyer pricing power the term sheet did not anticipate.

The unsolicited offer that arrived during exclusivity

A competing offer arrives during the no-shop. It is materially better. Under the agreement, the seller cannot engage. The fiduciary out is narrow and requires defined procedural steps. The seller learns that the protection they assumed they had was conditioned on triggers that may not be met in time.

The non-public deal that became public

The no-shop prevents the seller from soliciting buyers. It does not prevent third parties from learning about the deal. A leak occurs, news arrives, and other potential buyers approach the seller. The no-shop leaves the seller unable to respond beyond procedural acknowledgment.

The extension that compounded

The no-shop expires before signing. The buyer asks for an extension to close diligence. The seller agrees once, then again. The no-shop becomes the operational rhythm of the deal. The seller is committed to one buyer for far longer than originally negotiated.

Founder questions

The questions people actually ask.

What does a no-shop actually prohibit? A no-shop prohibits the seller from soliciting, encouraging, or engaging in discussions with alternative buyers during the period defined in the agreement. It usually covers the seller, its officers, directors, employees, and advisors. It typically also covers sharing diligence materials with parties outside the agreed deal.

What is a fiduciary out exception? A fiduciary out is a carve-out that allows the seller's board to consider an unsolicited superior proposal if its directors believe failing to do so would breach their fiduciary duty. The carve-out is conditioned on procedural steps such as notifying the existing buyer, providing a defined response window, and meeting a specific superiority test.

How long does a no-shop typically run? No-shop periods commonly run 30 to 90 days at term sheet stage, with extensions sometimes negotiated for diligence delays. In definitive agreements, a no-shop often extends through closing. The exact duration depends on deal complexity, regulatory approval timing, and negotiating posture.

Can a no-shop be extended? Yes. Extensions are common when diligence runs long or regulatory approvals are pending. Extensions favor the buyer and erode the seller's optionality. Sellers who agree to repeated extensions without revisiting the broader terms often discover that the cumulative period exceeded what they would have agreed to originally.

Bigger picture

Where this fits in the structure.

Exclusivity period is the broader frame. The no-shop is the contractual mechanism that enforces it. The two terms are used interchangeably and have overlapping language.

Related structure Breakup Fee

The no-shop limits the seller's options during the period. The breakup fee prices the cost of leaving the deal. The two together shape how reversible the seller's commitment actually is.

Related structure MAC Clause

The no-shop locks the seller in between signing and closing. The MAC is the buyer's matched ability to step out under defined conditions in the same window.

Related reading

Read the operating version next.

Related reading

If a no-shop is forming, expiring, or being extended around a deal in motion, that is a different conversation.

Bring the term sheet, the proposed no-shop language, and the timing of any other interested parties.

Apply Ways to Work