A recent study by Columbia Business School found that including a go-shop provision in Management Buyouts (MBO) and Private Equity Transactions does not lead to obtaining better offers.
The researchers, Adonis Antoniades, Charles W. Calomiris, and Donna M. Hitscherich, studied target companies in private equity and MBO transactions and their decisions whether to “shop” merger agreements prior to shareholder approval.
What they discovered is that go-shop clauses often result in a lower initial acquisition premium. Furthermore, there is not much of an improvement by obtaining additional bidders. Thus, go-shop agreements tend to be “value-destroying for targets.”
The Bradshaw Law Group is a boutique securities law firm focusing on domestic and international securities and M&A transactions.