What is a go-shop?

After signing, most merger agreements stop the target from looking for other bids. This is called a no-shop.

A go-shop turns that around for a set period. During it, the target may actively look for a better offer.

Say Woodgrove agrees to buy Litware for $50.00 a share, with a 40-day go-shop. For those 40 days, Litware's advisers can contact other possible buyers, share information and invite proposals.

When the go-shop ends, the usual no-shop applies.

A go-shop adds a market check after signing: a test of whether another buyer will pay more. It does so whether or not the target talked to other buyers before. Without one, the main market check comes before signing, though an unsolicited bid can still come after.

After a go-shop, or in a deal without one, three provisions decide what the target can do with a rival bid:

The no-shop

The target may not seek other bids. It can usually still respond to a proposal it didn't ask for, if that could lead to a better offer.

The fiduciary out

The target's board may end the agreement to accept a superior proposal. The target must follow the agreement's steps and pay the termination fee.

Matching rights

Before the target leaves, the first buyer gets a few days to improve its offer and match the rival's.

One count looked at 36 going-private deals for US public targets announced in 2024. In each, a private equity firm or similar buyer agreed to buy the company.

Every one had a fiduciary out and matching rights. Matching periods ran up to eight days.

Go-shops are mostly a private equity tool.

In 2024, 6 of 36 going-private deals had a go-shop. The average one lasted 41.7 days, about six weeks.

In 2023, 21% had one, averaging 35.0 days.

Go-shops rarely produce a higher bid.

In private equity deals from 2010 to mid-2019, a rival topped the deal during 7 of 114 go-shops, or 6.1%. That count leaves out one deal whose rival had bid before signing.

An earlier count, from January 2006 to August 2007, found higher bids in 6 of 48 go-shops, or 12.5%.

In a management buyout, the target's managers join the buyer. In the go-shop management buyouts studied from 2006 and 2007, no rival bid came after signing.

If Litware leaves for a rival found during the go-shop, it pays Woodgrove a termination fee. That fee is often lower during the go-shop.

In 2024, 11 of 123 deals had a lower fee for a period after signing. These figures cover 123 deals for US public targets announced in 2024, each with a transaction value above $50 million and a disclosed termination fee.

During that period, the median fee was 1.3% of transaction value. After it, the median was 2.7%.

All six go-shop deals in the 2024 going-private sample had a lower termination fee during the go-shop.

A go-shop gives other buyers a set time to bid. If none does, the deal continues on its signed terms.

A higher bid is the exception. If a rival bids more, holders may get a higher price. It may come from the rival, or from the first buyer matching it.

The fifth protection dot. When the filings give the day the go-shop ends, a tag shows it. Go-shop ends can also show in the Next column.

A deal without a go-shop is under a no-shop. Agreements usually still let the target consider a better offer it didn't ask for. That exception isn't a go-shop.