12.4 Ensuring Exclusivity, Deal Protection Devices 411transaction and a fair opportunity for other bidders to make competing offers. For
legal reasons, post-agreement market checks are more common in the US than in
Europe.^19
In 2007, ABN AMRO, a large European bank that was later taken over by a consortium of
banks, agreed to sell ABN AMRO North America Holding Company, which principally
consisted of the retail and commercial banking activities of LaSalle Bank Corporation, to
Bank of America for $21 billion in cash. ABN AMRO was desperate to use the sale as a
takeover defence. The sales agreement nevertheless contained a “go-shop” clause. The
clause allowed solicitation of interest for LaSalle within 14 days. Bank of America had a
right to match a superior bid within five days. If it decided not to exercise its right, the
agreement would expire and ABN AMRO would have to pay a break-up fee of $200 mil-
lion to Bank of America.
12.4.2 Exclusivity Clauses
Exclusivity clauses can be divided into two basic categories: performance prom-
ises and cancellation fees.
The prospective acquirer would prefer performance obligations to be under-
taken by all the parties that it in fact negotiates with and who can influence the
fate of the negotiations: the seller; the target; the target’s main shareholders; the
target’s board; and so forth (for legal constraints, see below).
Performance clauses. The main performance clauses include: no negotiation
clauses; no-shop clauses; no contract clauses (no merger clauses); no talk clauses;
and lock-ups.^20
No negotiation clauses prohibit the seller from negotiating with competing bid-
ders.
No-shop clauses prohibit the target from soliciting a competing offer from any
other prospective acquirers. However, such a clause can allow the target to con-
sider an unsolicited bid and even negotiate with the competing bidder.
No contract clauses (no merger clauses) permit the target to negotiate with a
prospective competing acquirer, but prohibits it from entering into an agreement
with the competitor until the initial bid has been brought before the shareholders.
Such clauses are meaningful provided that the transaction is one that must be ap-
proved by the general meeting.
Performance promises are sometimes qualified by using best efforts clauses
(for the dilution of clauses, see Volume II).
(^19) Ibid, p 73: “Although a market check has never been explicitly required by the Delaware
courts, it can allow the market to validate a board’s decision to accept a buyout proposal
and help establish the board’s fulfillment of its Revlon duties. Post-signing market
checks can be particularly useful in the management buyout context, where pre-signing
auctions are difficult (due to the advantages of the bidder who is allied with manage-
ment, and the difficulties of allowing management to work with multiple bidders) and
where allegations of conflicts of interest and Revlon violations are frequent.”
(^20) Bainbridge SM, op cit, pp 180–181.