VC & PE Glossary
What Is No-Shop?
Updated
Definition
A no-shop clause restricts a company — usually during term sheet exclusivity or M&A — from soliciting or accepting competing offers for a defined period without the counterparty's consent.
Useful for: Founders, Investors
No-shop (exclusivity) is a contractual promise not to actively market the company to other bidders or investors for a specified period while a lead party completes diligence and documentation.
How it works
Venture term sheets commonly include 30–45 day no-shop periods from signing. The company may still receive unsolicited inbound interest but cannot solicit competing term sheets. M&A LOIs often add no-talk or narrower no-shop variants, plus fiduciary out language allowing the board to consider superior proposals if required by duty to shareholders.
Breach may trigger loss of the deal, expense reimbursement, or break-up fees in larger transactions. Founders should clarify whether the no-shop starts at term sheet or LOI and whether extensions require mutual consent.
No-shop is reciprocal in some deals — the buyer also commits resources to close — but venture practice is usually one-sided toward the lead investor.
Why it matters
- Founders: Exclusivity is leverage you spend for commitment (lead name, price, timeline). Avoid open-ended no-shops; tie duration to documented milestones and keep parallel soft conversations legal under the exact carve-outs.
- Investors: Exclusivity protects process integrity. Lead investors invest partner time and legal costs expecting a fair shot at closing without a last-minute auction.
Common mistake
Signing a long no-shop with a slow or non-committal counterparty while runway shortens. Pair exclusivity with clear closing deadlines and material adverse change protections.
Related ideas
See also letter of intent, break-up fee, term sheet exclusivity, and go-shop (the opposite in some PE sales).
Related terms
- Break-Up Fee — A break-up fee is a contractual payment owed if one party terminates an M&A agreement under specified conditions — often when the seller accepts a superior offer after signing exclusivity with a first buyer.
- Letter of Intent — A letter of intent (LOI) is a non-binding or partially binding document that outlines the key terms of a proposed deal — acquisition, partnership, or major contract — before full definitive agreements are drafted.
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Common questions
Short answers for founders, LPs, and operators