Go-Shop Period

A go-shop period is a clause in an acquisition agreement that allows a target company to solicit and consider competing bids for a limited time after accepting a firm offer. The original bidder’s proposal acts as a floor while the target seeks potentially better terms. Go-shop windows typically last one to two months.

Key features

• Time-limited window (usually 30–60 days) to solicit competing offers.
• Initial bidder generally retains the right to match any superior proposal.
• If the target accepts a third‑party bid, the initial bidder usually receives a reduced breakup fee.
• Intended to help the board satisfy its fiduciary duty to seek the best deal for shareholders.

How it works

1. The target and an initial bidder agree to terms, including a go-shop clause.
2. During the go-shop period, the target can actively market itself, provide information to potential buyers, and solicit proposals.
3. Interested bidders submit indications of interest or offers; the initial bidder is typically allowed to match any superior offer.
4. If a competing bidder wins, the initial bidder receives a negotiated breakup fee (often smaller than in no-shop deals).

Comparison: Go-shop vs. No-shop

• Go-shop: the target may actively seek other bidders for a set period; used to maximize deal value and demonstrate that directors fulfilled fiduciary duties.
• No-shop: the target is contractually restricted from soliciting other proposals; it may still consider unsolicited offers as part of fiduciary duties. No-shop agreements commonly include larger breakup fees to discourage alternative bids.

Example: In the Microsoft–LinkedIn deal, the agreement included a no-shop clause and a $725 million breakup fee if LinkedIn accepted another buyer.

Criticism and limitations

• Often seen as cosmetic: critics argue go-shop periods rarely produce competing bids that displace the initial offer.
• Practical hurdles: short windows may not give potential buyers enough time to complete due diligence and formulate credible proposals.
• More common in deals where the buyer is a financial sponsor (e.g., private equity) or in go‑private/LBO transactions, but historical evidence shows only a small fraction of go-shops result in better offers.

Practical takeaway

Go-shop periods give target boards a structured opportunity to test the market after signing an agreement, helping demonstrate they sought the best value. However, their effectiveness depends on deal timing, deal complexity, and whether potential bidders can act quickly enough to present competitive offers.