Series 79 practice questionmediumDeal Protections
A 'go-shop' provision in a merger agreement allows the target company to:
- ARenegotiate the purchase price downward after signing
- BActively solicit competing bids for a specified period after signing the agreement✓ Correct answer
- CTerminate the agreement without paying a break-up fee
- DRequire the acquirer to increase its offer price
Explanation
Why B — Actively solicit competing bids for a specified period after signing the agreement
A go-shop provision permits the target to actively solicit competing acquisition proposals for a specified period (typically 30-60 days) after signing the definitive agreement. Go-shop provisions are commonly seen in private equity buyouts where the board wants to demonstrate it has tested the market to fulfill its fiduciary duties. If a superior offer emerges during the go-shop period, the break-up fee payable to the original bidder is often reduced.
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