By Fred @ Bizma in Negotiating Terms — Jul 2, 2025

No Shop: Giving exclusivity to a bidder

Going exclusive is a big milestone for your exit. Here's how to get the terms and scope in your favour.

The first draft of the Letter of Intent landed in my inbox.

This was a big milestone in the exit process – the first major step towards selling the company. This was our favoured bidder, who we expected to come in with the best overall package.

An hour later, the Board jumped on a call to discuss. We ran through the main points: the total price, earnout and targets, due diligence requirements, management retention.

One of our most experienced directors (with many exits under his belt), made an off-the-cuff comment I wasn't expecting:

Remember, power shifts to the bidder the moment you give them exclusivity.

I had read the 'no shop' clause in the LOI, and thought I understood its meaning.

Once we signed the LOI, we could only negotiate with this bidder while they complete diligence and final negotiations. We would inform our other potential bidders that we could no longer speak to them.

But I hadn't fully understood the wider consequences...

Negotiating leverage

Before you give exclusivity, the power sits with you.

You will hopefully have multiple bidders competing against each other to buy the business. That tension between competing bidders is the major leverage you have to push up the price and improve terms. See Creating Heat: Competitive Tension in an Exit for more on how to do this.

Exclusivity suspends your ability to create competitive tension. Once they are the only buyer, your leverage evaporates.

They can drop their price, push you on warranties, squeeze you on working capital... and you can't go to another bidder for a better deal.

You need to minimise the breadth of the exclusivity clause (reducing its time and scope), use it as leverage to get better terms before you sign the LOI, and be prepared for when exclusivity starts.

In this article, we'll break down:

how exclusivity clauses work
how you can negotiate the clause back, to minimise its impact
the practical steps you can take to keep leverage, and
what you should do to prepare before entering the exclusivity period.

Introduction

1. What is exclusivity (a “no-shop” clause) in an LOI?
This is a contractual promise that, until an agreed date, you won’t speak to other bidders or entertain other offers.

2. Why do bidders insist on exclusivity?
They’re about to invest serious money and time in the due diligence process and drafting the legal documents – both from their team and their external advisors.

To make that investment, they want to know they are the only bidder in the picture and that you won't call one day to tell them you've sold to someone else.

3. Is granting exclusivity really market standard, or can I refuse?
Exclusivity of some form is standard in almost every deal, with very rare exceptions.

A bidder will usually demand it at the LOI stage; after their initial discovery and before they commit major resources and funds to the deal.

If you totally refuse, the chances are that you will kill the deal.

But the terms of the exclusivity are negotiable: the length, scope, and bidder obligations you receive in return. More on that below.

Scope and mechanics

4. What are the components of an exclusivity clause?
In its most simple form, you will see language like:

“Seller agrees to a 90-day exclusivity period during which it shall not solicit, initiate or encourage any discussions with other prospective purchasers.”

A well-drafted clause will clearly define:

the duration of the exclusivity (this is key)
the specific actions of the buyer and seller which are prohibited, and any exceptions
break fees or other consequences of breach

Let's talk about these in turn, and how you can negotiate the clause in your favour.

5. How long does exclusivity last? What is a reasonable period?
You want this to be as short as possible. This is probably the single biggest lever you have to reduce its scope and impact.

The shorter the period, the more pressure on the bidder to get the deal agreed and signed. And as the expiry of the exclusive period gets closer (when you can go speak to other buyers), the pressure escalates.

You should expect 30–45 days for smaller or simpler deals, and up to 90 days for larger or more complex deals. Any longer than that should raise eyebrows unless there is a specific reason why the bidder would need longer, such as complex regulatory clearances which are needed.

6. Can the exclusivity period end early?
Yes, and this is nice leverage to keep the bidder honest.

You can argue that exclusivity should end if:

The bidder drops their price below a certain amount. That means that if the bidder has just high-balled you to get into exclusivity, or tries to excessively chip the price later, you can walk away and talk to others.
The bidder stops actively engaging in the deal. This means they can't squat on the deal until the exclusivity ends, even though their interest has ended. This can be hard to define specifically (what does "actively engaging" actually mean?!), but your lawyers can help flesh this out.

7. And can the exclusivity period be extended?
The bidder will argue that if the deal is close to getting done, they should get an automatic extension, maybe of another 15-30 days.

You should push back on agreeing to this up front in the LOI, and say that it can be extended by mutual agreement only nearer the time.

8. What am I actually prohibited from doing?
This will include anything related to selling the business to someone else, or doing anything that might encourage offers.

Expect this to be very broadly drafted to include: marketing the company for sale, giving information to potential bidders, discussing any part of an offer, soliciting or encouraging discussions with other bidders, sharing new data-room access and so forth. And this will usually stretch to your advisors, shareholders, board members and employees.

You should be allowed to respond to other interested parties who contact you to explain that you are in an exclusive period and the end date of the period.

9. What if we get a new unsolicited offer on better terms?
Your fiduciary duty as a Board of Directors is to act in the best interests of the company and its shareholders. If a clearly superior offer rolls in, you must be able to consider it, or you risk breaching that duty.

So you should include a carve-out in the exclusivity to allow you to consider such offers without being in breach. This is called a 'Fiduciary out' clause in the US.

Here's how this carve-out typically works:

You can't invite or encourage offers, but if an unsolicited offer arrives, you can review and consider it.
You will then need to inform the current bidder of the offer, and its key terms.
The bidder then gets a short window to (a week usually) to match or beat the new proposal.
If they don't match it, you are allowed to break off negotiations with them without breaching the exclusivity clause.
You might need to agree a concession of paying a break fee to the bidder, or reimbursing them their legal fees incurred to date. But if the new offer is materially better, this might be worth it.

10. What enforcement tools will bidders ask for if you break the exclusivity?
Bidders want the exclusivity clause to have some 'teeth' – clear consequences if you breach exclusivity.

Experienced bidders will push for you to pay a break clause if you breach exclusivity (which is usually 1–3 % of the deal value), and to reimburse them for costs incurred in the deal.

You will also face reputational damage if you do this – the bidder will make sure other players in the market know what you did, which will make it harder to attract buyer interest in future.

Negotiation

11. What concessions can I demand in exchange for giving exclusivity?
Exclusivity is just one of many terms in the LOI which you can trade for better terms elsewhere.

So treat it like any other negotiable term, and negotiate the LOI as a package.

And remember, your negotiating power is highest before you sign the LOI and give exclusivity... so now is the time to demand concessions, especially if you are offering generous terms around scope and duration.

That might include the headline price, the upfront vs conditional split or other key terms.

12. Are there options options to 'water down' the exclusivity?
There are, which you can push for if you have a strong negotiating position and are unsure about committing to one bidder right away.

Here are some options:

Go-shop. This gives you a short window of time during which you are allowed to solicit bids from other bidders. You would say: "We have other bidders interested, and we think they could outbid your current offer. We want 30 days to confirm their bids, and then you will get the deal exclusively if you have the best offer. But... if you increase your bid to £x, we will give you exclusivity right away."
Conditional or gated exclusivity. The exclusivity will only kick in once the bidder meets certain criteria. This is most commonly used where the bidders needs to secure deal financing and you have concerns over this – only once they have their financing in place will you give them exclusivity.
Fiduciary out. See question 9 above – this gives you the right to review and accept superior bids without breaching exclusivity.

13. When does it make sense to walk away from an exclusivity request altogether?
You should expect to grant some form of exclusivity. Every bidder will expect it.

If you are not prepared to give any form of exclusivity at all, that suggests that you don't want to choose this bidder over others, or that you don't really want to sell the company at all!

Preparing for exclusivity

Exclusivity isn't just about negotiating its terms. You need to get ready for what happens when the period of exclusivity starts.

The bidder knows they have the deal to themselves now, but only until the exclusivity period ends.

So they will want to get cracking with the due diligence very quickly, usually the day after the LOI is signed. They will have their advisors lined up and ready to go.

That means you need to have your data room ready to go and well-organised, so that you can respond to their document request list soon after. You don't need every document in the data room, but you should be ready to upload a substantial portion within a few days.

The deal is really kicking into action now!

Negotiating leverage

Introduction

Scope and mechanics

Negotiation

Preparing for exclusivity

Further Reading

Subscribe to Bizma