What is the No Shop Provision? A No Shop Provision is a clause included in an agreement between the seller and the buyer that prevents the seller from soliciting purchase proposals from other parties for a given duration of time. In essence, the provision limits the seller from seeking other potential buyers of the business…
What is the Revlon Rule? The Revlon Rule addresses conflicts of interest where the interests of the board of directors conflict with their fiduciary duty. Specifically, the Revlon Rule arose out of a hostile takeover. Prior to the takeover itself, the duty of the board of directors is to protect the company against the takeover….
What is an Investment Teaser? An investment teaser is a critical first step for a business in the capital-raising process. The teaser is a brief and confidential document designed both to gauge interest in, and to generate interest from, potential investors or buyers of a company or its securities. It’s used to present an investment…
What is a Business Exit Strategy? A business exit strategy is a plan for the transition of business ownership either to another company or investors. Even if an entrepreneur is enjoying good proceeds from his firm, there may come a time when he wants to leave and venture into something different. When such time comes,…
What is an Overallotment / Greenshoe Option? An overallotment option, sometimes called a greenshoe option, is an option that is available to underwriters to sell additional shares during an Initial Public Offering (IPO). The underwriters are allowed to sell 15% more shares than the number of shares they originally agreed to sell, but the option must…
What is Deal Fatigue? Deal fatigue refers to a condition during negotiations where parties on either side of the negotiation begin to feel frustrated, helpless, or exhausted by the seemingly unending negotiation process. Sometimes, members of negotiating teams tend to experience the feeling of giving up due to the failure to reach a consensus. Deal…
What is an Asset Deal? An asset deal occurs when a buyer is interested in purchasing the operating assets of a business instead of stock shares. It is a type of M&A transaction. In these cases, the buyer completes the transaction by providing the selling company consideration for some or all of the assets they…
What is a Data Room? A data room is a secure place that is used to store privileged data, usually for legal proceedings or mergers and acquisitions transactions. Data rooms are used for storing documents, file sharing, securing sensitive documents, and conducting financial transactions. There are two types of data rooms: physical data rooms and…
What is a Letter of Commitment? A letter of commitment is a formal binding agreement between a lender and a borrower. It outlines the terms and conditions of the loan and the nature of the prospective loan. It serves as the agreement that initiates an official loan borrowing process. A commitment letter contains information about…
What is the Anti-Dilution Adjustment Clause? The anti-dilution adjustment clause is a provision contained in a security or merger agreement. The anti-dilution clause provides current investors with the right to maintain their ownership percentage in the company by purchasing a proportionate number of new shares at a future date when securities are issued. …
