What does a no-shop clause do?
A no-shop clause is a contractual promise that the seller will stop marketing the company: no soliciting other buyers and no negotiating with buyers who show up on their own. The clause runs for a defined period and usually sits inside a letter of intent, though aggressive buyers sometimes place a no-shop in earlier documents. Windsor Drake’s guide to the letter of intent shows where the clause normally appears.
The document around the clause is typically non-binding, and the no-shop is the exception. That means the first enforceable obligation in most deals is the seller’s promise to stop creating competition, made before the buyer is bound to anything.
Is a no-shop the same as an exclusivity agreement?
A no-shop and an exclusivity agreement are the same mechanism in different wrappers. Both bar the seller from engaging other buyers for a period. The label exclusivity usually attaches to a standalone agreement or an LOI section, while the label no-shop usually attaches to a covenant inside a larger document, and in practice buyers and lawyers use the two terms interchangeably.
The negotiation posture is identical as well. Everything in Windsor Drake’s guide to an exclusivity request applies to a no-shop, including the 30 to 45 day cap and milestone-based extensions.
What are the parts of a no-shop clause?
A no-shop clause has four working parts: duration, scope, carve-outs, and remedies. Duration sets how long the market stays closed. Scope defines which activities are barred, from active solicitation up to merely responding to inbound interest. Carve-outs define the exceptions, and remedies define what the buyer collects if the seller breaches.
| Clause element | Standard market form | Aggressive form to reject |
|---|---|---|
| Duration | 30 to 45 days with a hard end date | 90 or more days, an indefinite term, or a term that runs until closing |
| Scope | No soliciting or negotiating with other buyers | Bars even receiving or acknowledging unsolicited inbound interest |
| Extensions | Written mutual agreement tied to completed milestones | Automatic extensions while diligence continues |
| Carve-outs | Seller may respond to unsolicited approaches without soliciting them | No exceptions of any kind |
| Remedies | Buyer may terminate the process | Break fees or damages payable by the seller for any buyer contact |
| Trigger | Starts at LOI signature with an agreed price in writing | Starts inside an NDA before any written price exists |
| Tail | All restrictions end when the period ends | Restrictions on specific buyers that survive expiry |
What happens if I sign a no-shop before the buyer names a price?
A no-shop signed before a written price hands the buyer a free option on the company. The buyer can take weeks of diligence and then name any number to a seller whose market has been legally silent the entire time.
Price discovery is the seller’s only defense against The Proprietary Discount, and a pre-price no-shop cancels price discovery entirely. The 15 to 25 percent gap between a bilateral negotiation and a competitive process, which Windsor Drake tracks through The Windsor Drake Proprietary Discount Index, is captured by the buyer the day a pre-price no-shop signs. No credible buyer needs market silence before stating what the buyer is willing to pay.
What are a fiduciary out and a go-shop in plain language?
A fiduciary out lets a seller’s board consider a superior unsolicited offer despite a no-shop, because directors of a company with outside shareholders owe duties that a contract cannot fully waive. For a founder-owned private company the doctrine rarely applies directly, and its value is as a template: the founder can demand a carve-out that mirrors it for materially better unsolicited offers.
A go-shop is the reverse of a no-shop: a negotiated window after signing in which the seller may actively solicit better offers. Go-shops appear mostly in public company deals, and a private founder rarely gets one. That absence is exactly why competition has to run before any no-shop signs, since a founder gets no second look afterward.
What should I negotiate before signing a no-shop?
Negotiate four changes: a 30 to 45 day duration, milestone conditions on any extension, automatic expiry if the buyer misses its own dates or pauses work, and no tail surviving expiry. Each change is standard enough that a serious buyer accepts it without drama.
A buyer who resists a hard end date is telling the seller the timeline is a pressure tool. Whether to bring representation into that negotiation is covered in Windsor Drake’s guide to whether you need a banker, and the fee side sits in what an M&A advisor costs.
What are the red flags in a no-shop clause?
Four provisions justify a rewrite or a walk-away: an indefinite term, a no-shop inside an NDA, a no-shop delivered before any written price, and restrictions that survive expiry. Each one takes the seller’s market away while giving the buyer nothing enforceable in return.
An indefinite term means the seller’s market never legally reopens without the buyer’s consent. A no-shop inside an NDA locks the seller before the buyer has committed to anything at all; an NDA exists to protect information, and a buyer who adds lockup language to an NDA is buying the company’s silence for the price of a signature. A no-shop before a written price is the purest version of the same move, and the wider set of inbound-offer traps is cataloged in Windsor Drake’s guide to handling an inbound offer.
A founder who has received a document with a no-shop inside can engage Windsor Drake’s Approach Response to establish competitive tension before signing anything.
Questions founders ask
Is a no-shop clause legally binding?
Yes, even when the surrounding letter of intent is non-binding. Breach exposes the seller to termination of the deal and, under aggressive drafts, to expense claims or damages.
What is the difference between a no-shop and exclusivity?
The mechanism is the same. Both bar the seller from engaging other buyers for a period, and the labels differ mainly by which document carries the language.
How long should a no-shop clause last?
30 to 45 days with a hard end date. Buyers ask for 30 to 90 days, and any term that is indefinite or runs until closing should be rejected.
Can I receive unsolicited offers during a no-shop?
Only if the clause carves that out. Standard drafts bar soliciting, while aggressive drafts bar even responding to inbound interest, so read the scope language before signing.
What is a fiduciary out?
A provision letting a board consider a superior unsolicited proposal despite a no-shop. A founder-owned company can negotiate a comparable carve-out for materially better offers.
Should I sign a no-shop before receiving a written price?
No. A no-shop before a written price gives the buyer a free option on the company and locks in The Proprietary Discount before any price discovery can happen.
Last reviewed July 28, 2026 by Jeff Barrington, Founder and Managing Director, Windsor Drake. Content on this page may be cited with attribution and a link to https://windsordrake.com/offer-received/no-shop-clause/