Standstill Agreement Takeover

The agreement is particularly relevant because the bidder would have access to the confidential financial information of the entity concerned. After receiving the commitment of the potential purchaser, the target entity has more time to set up additional defence facilities for the acquisition. In some situations, the target entity agrees to repurchase shares of the target with a premium in return for the potential purchaser. Status quo agreements are also used to suspend the usual limitation period to make a claim in court. [1] A status quo agreement can be reached between a lender and a borrower. It gives the borrower time to restructure its debts. On the other hand, the lender provides for a certain moratorium on the payment of interest or principal loans. As a hostile anti-opaque defense mechanism, the target company can obtain a promise from an unfriendly bidder to limit the amount of shares the bidder can buy or hold in the target company. This gives the target company time to implement other acquisition defence strategies. In return, the target entity may repurchase the equity holdings of the potential purchaser on the target share with a premium. The target company may offer another incentive, such as. B a seat on the board of directors. A status quo agreement can also be an agreement between the parties not to deal with other parties for a specified period of time during negotiations.

It can also be used as an alternative to bankruptcy or enforced execution. In other areas of activity, a status quo agreement can be virtually any agreement between the parties, in which both parties agree to discontinue the case for a specified period of time. This may include an agreement to defer payments to help a company in difficult market conditions, agreements to stop the production of a product, agreements between governments or many other types of agreements. A status quo agreement is an agreement that preserves the status quo. It is an agreement between the objective and the bidder that prevents the bidder from making an offer to purchase the target without first obtaining its approval. It can be added as a provision in the confidentiality agreement and will be executed before obtaining due diligence material. A status quo agreement aims to prevent hostile bids and provides a possible remedy in case the bidder uses confidential information to make a hostile offer if the parties fail to reach a mutual agreement on the terms of sale. With respect to proposed mergers and acquisitions of so-called enterprises, the target company often requires that the potential acquirer enter into a status quo agreement that protects the public objective from unwanted acquisition attempts by the potential acquirer.

Status quo agreements provide the target entity and its board of directors with different levels of protection and stability for the implementation of an orderly sales process. These status quo agreements are generally part of the confidentiality agreement reached by the parties prior to the exchange of proprietary and non-public information for the purposes of the applicant`s due diligence investigations. The rationale for the target company`s request for a status quo agreement is simple – the objective must be consensual and the conditions must be agreed upon. Therefore, before confidential information about its activities and activities is provided and before the potential acquirer agrees to enter into a definitive acquisition agreement, the target entity wishes to ensure that the potential acquirer does not use the confidential information to make a hostile offer of the target if the parties fail to reach a mutual agreement on the terms of the sale.

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