Go shop
M&A / Merger ModelA window immediately after signing during which the target is permitted to solicit competing offers, reversing the no shop for a defined period.
Also written: go-shop, go shop period, go shop provision
A go shop is the mirror image of a no shop. For a defined window after signing, usually a matter of weeks, the target may actively go out and look for a better offer rather than merely respond to one that arrives. The same banker who ran the original process normally runs it, re contacting parties that passed and approaching buyers nobody canvassed the first time.
Two features decide whether it can produce anything. The break fee usually steps down, so switching inside the window costs the target less than switching outside it. And the original buyer keeps matching rights, a short period in which it may revise its own offer before the board is allowed to terminate.
Those two do not offset each other. The step down lowers a rival's hurdle by exactly the size of the step. The matching right hands the incumbent a free option on diligence the rival has paid for, so a rival wins only where the incumbent declines to match, which is where the price has already passed the incumbent's own view of value.
Its real function is therefore evidential rather than economic. A board that negotiated with one buyer without running a pre signing auction can point to a genuine post signing market check if it is later sued, which is why go shops cluster in exactly the deals whose pre signing process was thinnest. If the window expires with nothing, the agreement reverts to standard no shop terms and the deal proceeds, which is the usual outcome.
It is an American instrument answering an American problem, and it does not travel to a UK public offer. Rule 21.2 of the Takeover Code makes the no shop, the matching right and the target break fee offer related arrangements, so the lock up a go shop relaxes cannot generally be agreed in the first place.
Worked example
Illustratively, a deal signs at 1,000 of equity value with a fee of 15 inside the window and 30 outside it.
A rival that values the target at 1,060 must clear 1,016 inside the window and 1,031 outside it, so the step down is worth exactly 15 of hurdle.
The incumbent can then match at 1,016 after the rival has paid for its own diligence, which is why the door is narrower than the fee suggests.