Exclusivity Transaction
Definition
Period of time, typically 30 to 60 days, in which a business seller engages with a single prospective buyer. Exclusivity is a best faith agreement where both sides promise to work towards a successful close and the seller agrees not to work with another bidder. If exclusivity is an option, it is generally included in the letter of intent (LOI) and is known as a no-shop clause.
Comments
Exclusivity is typically granted once a seller has done due diligence on various buyers and feels confident a transaction will go through with a selected party. At this stage, the purchase price has largely been "agreed" upon (save adjustments). However, there are risks for the seller in granting exclusivity. In time-sensitive situations for example, a buyer may attempt last minute price reductions.
Referring Terms
Due diligence checklist, No-shop clause, Letter of intent (LOI)For profiles of 1,400+ private equity firms, including portfolio and professional info, please consider a free 30-day trial membership.
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