What Is a Standstill Agreement?
A standstill agreement is a contractual restriction in which one party — typically a potential acquirer, activist investor, or strategic partner — agrees to refrain from taking specified hostile or unsolicited actions against a company for a defined period. In M&A, standstill provisions are most commonly embedded in non-disclosure agreements (NDAs) signed during the due diligence process, ensuring that a party who receives confidential information cannot use that informational advantage to launch an uninvited bid.
Standstill agreements are a critical tool for balancing the competing interests of information sharing (necessary for deal evaluation) and corporate protection (preventing the misuse of that information).
Types of Standstill Provisions
NDA Standstills (Most Common)
Embedded in the confidentiality agreement signed before a potential acquirer receives non-public information:
| Restriction | Typical Scope |
|---|---|
| Share acquisition | Cannot acquire additional shares beyond current holdings |
| Tender or exchange offer | Cannot launch an unsolicited tender offer |
| Proxy solicitation | Cannot initiate a proxy fight or nominate directors |
| Group formation | Cannot join a group or wolf pack seeking control |
| Public statements | Cannot make public proposals or statements about a transaction |
Activist Standstills
Negotiated between a company and an activist shareholder to resolve or pause a campaign:
- Activist agrees to cease public campaign and support the board’s slate
- Company may agree to appoint the activist’s nominee(s) to the board
- Standstill period typically 12-24 months
- May include provisions for the activist to resume if certain conditions are not met
Creditor Standstills
In restructuring contexts, creditors agree to pause enforcement actions:
- Lenders agree not to accelerate debt or enforce security
- Provides breathing room for the company to negotiate a restructuring plan
- Typically short-term (30-90 days) with potential extensions
Key Terms
Duration
- NDA standstills — typically 12-24 months from the date of the NDA
- Activist standstills — typically 12-18 months, aligned with the annual meeting cycle
- Creditor standstills — 30-180 days, depending on the complexity of the restructuring
”Don’t Ask, Don’t Waive” Provisions
The most controversial standstill term is the “don’t ask, don’t waive” (DADW) provision:
- Prevents the restricted party from even requesting that the board waive the standstill
- Effectively bars private approaches to the board, even if the board might welcome them
- Delaware courts have scrutinised DADW provisions, with the In re Complete Genomics decision establishing that boards cannot agree to DADW provisions that prevent them from fulfilling their fiduciary duties
Fall-Away Provisions
Standstills may include triggers that cause the restrictions to terminate early:
- Company enters into a definitive agreement with a third party
- Another party makes a public proposal
- The board recommends a competing transaction
- The company undergoes a change of control
According to Practical Law (Thomson Reuters), over 90% of NDAs in competitive M&A processes include standstill provisions, with fall-away triggers included in approximately 60-70% of those agreements.
APAC Context
Australia — standstill provisions in Australian M&A NDAs are common, though they must be considered in light of the Corporations Act provisions governing takeover bids and schemes of arrangement. The Takeovers Panel may consider whether a standstill provision has the effect of frustrating a bid that is in shareholders’ interests.
Japan — standstill agreements are used in Japanese M&A, particularly when foreign bidders are given access to confidential information about Japanese targets. Japanese standstills tend to be shorter in duration and are often negotiated as part of broader framework agreements.
India — standstill provisions in Indian M&A NDAs are enforceable under the Indian Contract Act. For listed companies, standstill restrictions must be consistent with SEBI’s Takeover Regulations and insider trading rules.
“Standstill provisions are the price of admission to confidential deal processes — but the specific terms matter enormously,” observes Daniel Bae, founder of Amafi. “In APAC cross-border deals, standstill provisions must be crafted with local regulatory frameworks in mind.”
Structuring deal processes across Asia Pacific? Amafi helps companies and investors navigate confidentiality arrangements and deal protection. Learn more.