What Is a Window Shop Provision?
A window shop provision (also called a “go-shop lite” or passive market check) is a contractual term in a merger agreement that permits the target company’s board to receive, evaluate, and respond to unsolicited acquisition proposals from third parties, while prohibiting the board from actively soliciting or initiating contact with potential competing bidders. The window shop sits between a strict no-shop clause (which restricts both solicitation and engagement) and a full go-shop clause (which actively permits the target to seek better offers).
The window shop balances the buyer’s interest in deal certainty with the target board’s fiduciary obligation to consider potentially superior alternatives.
How It Works
Comparison of Market Check Provisions
| Provision | Solicitation | Engage with Unsolicited | Common In |
|---|---|---|---|
| No-shop (strict) | Prohibited | Limited (fiduciary out only) | Negotiated deals, PE acquisitions |
| Window shop | Prohibited | Permitted (can engage, provide information, negotiate) | Strategic acquisitions, balanced negotiations |
| Go-shop | Actively permitted for a defined period | Permitted | PE-led deals, deals with lower premiums |
Window Shop Mechanics
- No active solicitation — the target cannot initiate contact with potential bidders or instruct its advisors to do so
- Passive receipt permitted — the target can receive unsolicited indications of interest
- Information sharing — the target can provide confidential information to a third party that makes a bona fide proposal (subject to NDA)
- Negotiation — the target can negotiate with the third party
- Superior proposal determination — if the board concludes the third party’s offer is superior, it may exercise its fiduciary out
- Match right — the original buyer typically receives notice and a matching period before the board can act on the superior proposal
Negotiation Context
When Window Shops Are Used
- Balanced negotiations — neither party has dominant bargaining power
- Strategic transactions — where the buyer and target negotiate at arm’s length
- Moderate premiums — the offer is fair but not overwhelming
- Active market — there are known potential competing bidders
Buyer vs Target Perspectives
Buyer wants a strict no-shop because:
- Maximum deal certainty
- Discourages third parties from approaching
- Protects the buyer’s investment of time and resources
Target wants a window shop (or go-shop) because:
- Preserves the board’s fiduciary duties to consider all alternatives
- Creates the possibility of a topping bid that benefits shareholders
- Reduces the risk of shareholder litigation claiming the board failed to maximise value
Distinction from Fiduciary Out
All merger agreements — whether no-shop, window shop, or go-shop — include a fiduciary out. The difference is in what the board can do before determining that a superior proposal exists:
- No-shop with fiduciary out — board can only engage with a third party if the board first determines the proposal could reasonably be expected to lead to a superior proposal
- Window shop — board can freely engage with and evaluate any unsolicited proposal without a preliminary determination
According to Practical Law (Thomson Reuters), window shop provisions appear in approximately 20-30% of public company merger agreements, with go-shop provisions in approximately 15-20% and strict no-shop provisions in approximately 50-60%.
APAC Context
Australia — Australian scheme of arrangement implementation deeds typically include “no shop / no talk” provisions with a fiduciary out. The “no talk” restriction (equivalent to a strict no-shop) is standard, but the fiduciary carve-out allows the board to engage with unsolicited proposals that could be superior — functionally similar to a window shop in practice.
Japan — market check provisions in Japanese M&A agreements are becoming more common as deal protection norms develop. The 2023 METI M&A Guidelines encourage target boards to consider competing offers, which supports broader engagement rights than strict no-shop provisions.
India — deal exclusivity provisions in Indian M&A are negotiated on a transaction-specific basis. For listed company transactions, the target board’s fiduciary obligations under the Companies Act require consideration of shareholder interests, which may limit the enforceability of strict no-shop restrictions.
“Window shop provisions reflect the fundamental tension in M&A between deal certainty and value maximisation,” observes Daniel Bae, founder of Amafi. “In APAC, where deal protection norms are less standardised than in the US, the specific formulation of market check provisions is a key negotiation battleground.”
Structuring deal protection across Asia Pacific? Amafi helps companies and investors negotiate M&A agreements with appropriate market check provisions. Learn more.