What is No-Shop Clause?
A No-Shop Clause (also called Exclusivity Agreement or Exclusive Dealing Period) is a provision in M&A transactions:typically in letters of intent or definitive agreements:that prohibits the seller from soliciting, negotiating, or accepting competing offers during a specified period. No-shop clauses give buyers deal certainty to invest in expensive due diligence and negotiation without competing bidders disrupting the process.
Standard No-Shop Provisions
Typical no-shop terms include: prohibition on solicitation of competing offers, restriction on providing information to other potential bidders, restriction on entering substantive negotiations with other parties, duty to notify the buyer if unsolicited proposals are received (often within 24-48 hours), exclusivity period (typically 30-90 days in LOIs; through closing in definitive agreements), and remedies for breach (typically termination fee equal to the buyer’s reasonable expenses or a contractually-set fee). The clause is typically binding even when most other LOI terms are non-binding.
Fiduciary Out Exception
Most no-shop clauses:particularly in public company deals:include a “fiduciary out” exception allowing the board to consider unsolicited “superior proposals” when fiduciary duties require it. A typical fiduciary out: the seller cannot solicit alternative bids but if an unsolicited bid arrives, the seller can engage in discussions if the board reasonably concludes the bid is or could reasonably be expected to result in a “superior proposal,” and ultimately can terminate the no-shop in favor of a superior deal (subject to termination fee). The Delaware court’s QVC v. Paramount decision established fiduciary duty principles requiring this flexibility.
Go-Shop Alternative
A “go-shop” clause is the opposite of a no-shop: it specifically allows, and indeed requires, the seller to actively solicit competing bids for a defined post-signing period (typically 30-45 days), with a lower break-up fee for accepting a topping bid during the go-shop period. Go-shops are common in PE-led transactions where the board wants to satisfy fiduciary duties by testing the market. Despite the active solicitation right, go-shops rarely produce topping bids: deal certainty, timing pressure, and information disadvantages typically favor the original buyer. Turkish M&A practice has historically used no-shop provisions; go-shop structures are less common but appearing in larger private deals.
Under Turkish Law
Even where the rest of a letter of intent is non-binding, the no-shop and confidentiality provisions are usually made expressly binding, which falls within freedom of contract (Turkish Code of Obligations, Art. 26). A fixed amount payable on breach of a no-shop (break-up fee) may, depending on how it is drafted, be subject to the rules on penalty clauses (Turkish Code of Obligations, Art. 179 et seq.). A court may reduce an excessive penalty (Art. 182/3), but a party that gave the undertaking as a merchant cannot ask for a reduction on the ground that the penalty is excessive (Turkish Commercial Code, Art. 22). The amount and the events that trigger it should therefore be written out expressly.