Drafting Go-Shop Clauses In Canadian M&A Transactions

While still used sparingly, there has been a slight increase in the use of "go-shop" clauses by Canadian targets in friendly acquisitions over the past few years. The few issuers that used go-shops were able to sign an acquisition agreement and conduct a market check after signing, thereby enabling them to secure an offer for the company while still preserving their ability to actively seek higher bids.

In most friendly acquisitions of Canadian companies, however, the target will conduct a market check before entering into an acquisition agreement. Since the target has already conducted a market check, the buyer will insist that the acquisition agreement contain a "no shop" provision that, subject to limited exceptions, prohibits the target from soliciting or dealing with competing offers.