standstill agreement

Time Pause

Granting space for the board and management allows for the consideration of an offer without the pressure of a hostile takeover. When a standstill agreement is signed, it creates a stable environment for due diligence and negotiation. This period allows the founder to focus on the long term implications of a sale rather than immediate defensive measures.

Confidentiality Control

Protecting sensitive data is often a key component of these arrangements during a merger process. A standstill agreement usually follows the sharing of proprietary information, ensuring that the recipient cannot use that data to gain an unfair advantage in the market. This protection is a necessary cost of transparency during high stakes negotiations.

Duration Limit

The restrictions are only in effect for a specified period as defined in the contract. A standstill agreement typically expires after six to eighteen months, after which the parties are free to resume their previous activities. This boundary ensures that the company cannot indefinitely block a legitimate attempt to acquire it.