Many private equity investors have not been including so-called "drag-along" or "bring-along" rights in their standard term sheets and investment documents. In light of the recent decision of the Delaware Supreme Court in the Omnicare case, investors have even more reason to consider adding such provisions. In addition, even if investors are currently including drag-along rights in their agreements, these rights should be reviewed to be sure they are up-to-date and effective.
Definition.
"Drag-along rights" are provisions (most commonly found in shareholders’ agreements) that require all shareholders subject to the agreement to agree in advance to participate in a future acquisition of the company if a specified percentage of the shareholders or preferred shareholders support the acquisition. The shareholders agree to vote for a merger, or a sale of the target company’s assets, or to sell their stock directly to the prospective purchaser, and not to seek appraisal rights. Drag-along
