TLDR:
A Standstill Agreement is a contract restricting one party from taking certain actions—primarily accumulating shares, making tender offers, or launching proxy contests—with respect to another party for a defined period. Standstill agreements appear in multiple M&A and corporate contexts, primarily to prevent the receiving party from using confidential information shared during negotiations to mount a hostile bid.
Standstill in M&A Due Diligence
The most common use is alongside NDAs in M&A negotiations: when a target shares confidential information with a potential acquirer for due diligence, the parties enter into a standstill prohibiting the potential acquirer from: accumulating target shares above a defined threshold (often 5%), making unsolicited bids, participating in proxy contests, or otherwise exerting acquisition pressure for a specified period (typically 12-24 months). The standstill protects the target from the very real risk that a friendly diligence process becomes the foundation for a subsequent hostile bid.
Standstill in Activism Defense
Standstill agreements also appear in settlements with activist investors. When an activist agrees to drop a proxy contest or other pressure tactics, the standstill commits the activist to refrain from those tactics for a defined period (typically 2-3 years), often in exchange for board seats, share repurchases, or other negotiated commitments. The standstill provides the company with negotiation finality and operational space; the activist receives agreed outcomes without continued conflict.
Drafting and Enforcement
Standstill drafting addresses: covered actions (specific list including share accumulation, board nominations, business combinations), thresholds for percentage accumulation, duration, “fall-away” provisions (release if target signs a deal with another party—preventing the standstill from being weaponized), public statement restrictions, and remedies for breach (injunctive relief plus damages). Recent Delaware court decisions (e.g., Mac-Gray, K-V Pharmaceutical) have rigorously enforced standstills against potential acquirers attempting to circumvent. In Türkiye, standstill arrangements occur primarily in international transactions with Turkish targets; domestic Turkish takeover battles are rare given concentrated family ownership in most public companies.