Go-Shop Provision

Quick Facts

Duration: Typically 30-50 days after signing

Success rate: Superior bids emerge in only ~7% of go-shop deals

Break-up fee: Often reduced (50-60% of standard) during go-shop period

Common in: Private equity deals more than strategic acquisitions

A go-shop provision allows the target company to actively solicit competing bids for a specified period after signing a merger agreement. Unlike a "no-shop" clause that prohibits solicitation, a go-shop explicitly permits the target's board to seek a better deal.

In Plain English

A go-shop is like listing your house for sale after already accepting an offer—but the first buyer agreed to it. The target company has a window (usually 30-50 days) to shop the deal and find someone willing to pay more. If they do, they can switch to the better offer (paying a reduced break-up fee to the original buyer).

How Go-Shop Provisions Work

Merger agreement signed with go-shop provision
Go-shop period begins (30-50 days)
Target actively solicits competing bids
Period ends: Either a superior proposal emerges or it doesn't
No-shop kicks in: After go-shop expires, standard no-shop applies
Deal closes with original or superior bidder

Go-Shop vs. No-Shop

Feature	Go-Shop	No-Shop
Active solicitation	Permitted for limited time	Prohibited
Board's fiduciary duty	Easier to satisfy	Harder to defend
Break-up fee during period	Reduced (50-60%)	Full fee applies
Signal to market	Deal may not be done	Deal is locked up
Common in	PE deals	Strategic deals

Typical Go-Shop Terms

Duration

Minimum: 30 days (shorter may face legal scrutiny)
Standard: 35-45 days
Extended: Up to 60 days for complex targets

Break-Up Fee Structure

During go-shop: Reduced fee (1.5-2% of deal value)
After go-shop: Full fee (3-4% of deal value)
For "excluded parties": Reduced fee may extend if specific bidders emerged during go-shop

Matching Rights

Original buyer typically has the right to match any superior proposal:

Notice period: 3-5 business days to match
Multiple rounds: May require notice for each improved offer
Information rights: Access to competing bid terms

Famous Examples

Dell Inc. (2013)

When Michael Dell and Silver Lake agreed to take Dell private for $24.4 billion, the deal included a 45-day go-shop. Competing bids emerged from Blackstone Group and Carl Icahn, ultimately leading to a price increase to $24.9 billion.

Whole Foods Market (2017)

Amazon's $13.7 billion acquisition included a short 28-day go-shop. No superior proposals emerged, validating the Amazon offer.

Panera Bread (2017)

JAB Holding's $7.5 billion deal included a 40-day go-shop. Despite the opportunity, no competing bids materialized.

Why Go-Shops Rarely Produce Competing Bids

Only about 7% of go-shop deals see superior proposals emerge:

Short timeline: 30-50 days isn't enough for new bidders to do diligence
Winner's curse: Original buyer likely already valued target fairly
Signaling effect: If great deal existed, why wasn't it found before?
Matching rights: Competing bidders know they can be matched
Break-up fee: Even reduced, creates cost for competing bidder
Information asymmetry: Original buyer has head start

Legal Context

Revlon Duties

When a company is "for sale," Delaware law requires directors to seek the best price for shareholders. Go-shop provisions help satisfy this duty by:

Demonstrating market check occurred
Providing opportunity for higher bids
Documenting board's process

Criticism

Some argue go-shops are "window dressing":

Too short for real competition
Original buyer has too many advantages
Creates illusion of auction without substance
Matching rights deter serious competing bids

When Go-Shops Make Sense

Go-shops are most appropriate when:

Single-bidder negotiations: No prior auction process
Private equity buyer: Financial buyers more common
Board concerns: Need to demonstrate fulfillment of fiduciary duties
Market uncertainty: Genuine possibility of higher offers

Negotiating Go-Shop Terms

Sellers Should Seek:

Longer duration (45+ days)
Lower break-up fee during period
Broader definition of "superior proposal"
Extended reduced fee for serious bidders identified during go-shop

Buyers Should Seek:

Shorter duration (30-35 days)
Strong matching rights
Higher break-up fee after period
Limitations on who can compete

Practical Takeaways

For sellers: Go-shop provisions help demonstrate you fulfilled your fiduciary duties, even if superior bids rarely emerge. Negotiate for adequate duration and reduced break-up fees to make competition genuinely possible.

For buyers: Accept go-shops as the cost of winning deals without a full auction—they rarely result in losing the deal. Focus on strong matching rights and appropriate break-up fees to protect your position.

Break-Up Fee — Fees that apply if deals fall through
White Knight — When competing bidders do emerge
Fiduciary Duty — What go-shops help directors satisfy