No-shop clause

Definition

The no-shop is what makes an LOI meaningful in practice. Without one, a seller can run multiple buyers in parallel to the last minute: fine for competitive auctions, fatal for bilateral negotiations where the buyer wants to invest in due diligence. With a no-shop, the buyer knows: between LOI signing and exclusivity end all alternatives sit on pause, and they can justify €30-150k in DD spend on the basis that they won't be undercut by a last-minute bid.

The clause has five typical components. Duration: 60 to 90 days for mid-market Benelux deals, sometimes extendable by 30 days with mutual consent. No-shops longer than 120 days are rarely accepted by sellers; market feedback gets stale or buyer momentum evaporates. Scope: what the seller cannot do: actively solicit bids, share information with third parties, negotiate, even preparatory conversations. Some no-shops carve out "passive" events (unsolicited approaches) and allow "responding"; others are absolute.

Break fees are the enforcement mechanic. In Benelux SME deals a break fee is rarer than in large-cap M&A: sometimes 1 to 3% of transaction value, sometimes flat amounts around €25-75k for sunk DD costs. Some LOIs have no break fee and only an exclusivity bar (the seller cannot sign a second LOI, no monetary penalty for breach). Important nuance: in Belgium and the Netherlands, "force the deal": obliging completion of the transaction: is almost never enforced, even if it sits in the LOI; courts typically reduce that to damages.

The two most important carve-outs every seller wants explicitly in the SPA: (1) "fiduciary out": the board of the seller entity can receive and consider an unsolicited superior bid without breaching the no-shop, provided the bid is demonstrably higher. Standard in public-company M&A, less common in SME context but increasingly requested. (2) "Existing relationships": conversations with current advisors, banks, or partners about financing or deal structure don't count as no-shop breaches. Without this carve-out an innocent banker conversation can be legally framed as shopping.

Worked example

A Flemish software firm negotiated an LOI with a Dutch strategic buyer. No-shop: 75 days, break fee €60k. On day 58 the CEO received an unsolicited email from a British PE firm with an interest indication 25% above the LOI amount. Under a strict no-shop, even reading would breach. But the LOI contained a fiduciary-out explicitly permitting "unsolicited approaches that appear demonstrably superior": the board could receive the bid, evaluate it, and on demonstrated higher value terminate exclusivity with the first buyer against an increased break fee of €120k. Result: a new LOI with the PE firm at €25.5m instead of the original €20m. €5.5m swing, with €60k of extra break-fee cost. Lesson: negotiate a fiduciary-out even when the buyer protests.

When it matters

In every serious LOI. Points to negotiate before signing: (1) duration that covers the DD process without trapping the seller too long (60 to 75 days sweet spot), (2) a fiduciary-out for unforeseen superior bids, (3) a break fee proportional to buyer DD cost: not a penalty factor that makes voluntary exit by the seller economically infeasible.

Frequently asked

How long is a typical no-shop for Benelux SMEs?

60 to 90 days for mid-market deals, sometimes extendable by 30 days with mutual consent. Less than 60 days gives the buyer insufficient DD time; more than 120 days costs the seller momentum. 75 days is the centre of gravity.

What is a "fiduciary out" and why should I negotiate one?

A fiduciary-out lets the board receive and evaluate an unsolicited superior bid without breaching the no-shop. Protects against the situation where a demonstrably better buyer surfaces after LOI signing. Standard in public deals, increasingly common in mid-market.

Is a no-shop enforceable in Belgium and the Netherlands?

Yes, exclusivity clauses in M&A LOIs are enforceable in principle under contract freedom. A court can convert a no-shop breach into damages (the buyer's sunk DD costs) but rarely into "specific performance" (forced completion). Practical: respect the no-shop or accept the financial penalty.

What's a reasonable break fee for a Benelux SME deal?

1 to 3% of transaction value, or a flat amount between €25k and €75k for sunk DD costs. Higher than 3% is rarely accepted by sellers and can be moderated as disproportionate in court. Below €5m EV break fees are sometimes absent entirely.