Exclusivity

Exclusivity (also called a no-shop period) is a provision in a letter of intent that prevents the seller from soliciting or entertaining offers from other buyers for a specified period — typically 30–90 days — while the buyer completes due diligence and negotiates the purchase agreement.

Exclusivity protects the buyer's investment of time and money in due diligence by preventing the seller from running a parallel sale process or using the buyer's diligence findings to negotiate with competing bidders. In return, the seller typically expects the buyer to proceed expeditiously and in good faith toward closing.

Exclusivity periods are almost universally included in letters of intent for Canadian business sales. A seller may negotiate a break fee or reverse break fee — a payment owed if the deal terminates without completion — to compensate for the opportunity cost of taking the business off the market.

See also: Letter of Intent, Due Diligence, Purchase Agreement.