Series 79 practice questionmediumDeal Protections
Which of the following best describes a 'go-shop' provision in a merger agreement?
- AIt allows the acquirer to solicit competing bids after signing.
- BIt permits the target to actively seek higher offers for a limited period after signing the agreement.✓ Correct answer
- CIt automatically extends a no-shop period if a competing bid emerges.
- DIt requires the target to pay a higher breakup fee if a superior proposal is accepted.
Explanation
Why B — It permits the target to actively seek higher offers for a limited period after signing the agreement.
A go-shop clause enables the target to actively seek competing proposals, usually for a limited time after signing. It contrasts with a no-shop, which restricts such actions. Misunderstanding the direction of who shops can lead to confusion about deal dynamics.
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