Series 79 practice questionmediumDeal Protections
A merger agreement includes a no-shop clause. What does this restrict the target company from doing?
- ASeeking alternative acquisition proposals except as allowed by a fiduciary out✓ Correct answer
- BPaying a breakup fee to the acquirer under any circumstances
- CDiscussing the merger with existing shareholders
- DRequiring board approval for all contracts
Explanation
Why A — Seeking alternative acquisition proposals except as allowed by a fiduciary out
A no-shop clause limits the target’s ability to seek or negotiate with other buyers, except as permitted by a fiduciary out. Mistaking this for a blanket prohibition is common, but fiduciary duties may require exceptions.
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