Contractual counterparties often plant the seeds of litigation during negotiations over a preliminary framework for a complex corporate transaction—well before parties commit to the ultimate deal. Preliminary agreements, often styled as letters of intent (LOIs), can impose significant obligations on their signatories, even if a deal never ultimately closes. And where a deal falls apart because of a competing offer at the 11th hour, no-shop provisions can become a critical battleground for any ensuing litigation.

A “no-shop” or “exclusivity” provision in an LOI temporarily restricts one or both parties to an M&A negotiation from discussing competing transactions with third parties. No-shops offer a powerful tool for incentivizing parties to negotiate in good faith. Corporate parties (typically potential acquirors) often employ no-shops to protect themselves from investing resources into negotiating with a counterparty who intends to use the negotiations as a stalking horse for other transactions.