The term standstill agreement refers to various forms of agreement which may be entered into in order to delay action which might otherwise take place.
Examples
A standstill agreement may be used as a form of defence to a
hostile takeover
In business, a takeover is the purchase of one company (law), company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are publicly listed, in contrast t ...
, when a target company acquires a promise from an unfriendly bidder to limit the amount of stock that the bidder buys or holds in the target company. By obtaining the promise from the prospective acquirer, the target company gains more time to build up other takeover defenses. In many cases, the target company promises, in exchange, to buy back at a premium the prospective acquirer's stock holdings in the target.
Common
shareholder
A shareholder (in the United States often referred to as stockholder) of corporate stock refers to an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the ...
s tend to dislike standstill agreements because they limit their potential returns from a takeover.
Another type of standstill agreement occurs when two or more parties agree not to deal with other parties in a particular matter for a period of time. For example, in negotiations over a merger or acquisition, the target and prospective purchaser may each agree not to solicit or engage in acquisitions with other parties. The agreement increases the parties' incentives to invest in negotiations and due diligence, respecting their own potential deal.
Standstill agreements are also used to suspend the usual
limitation period for bringing a claim to court. Parties in a legal dispute may voluntarily withdraw their claims against each other to allow time for some other form of resolution and execute a standstill agreement to protect their legal rights.
United States Court of Appeals for the Seventh Circuit
The United States Court of Appeals for the Seventh Circuit (in case citations, 7th Cir.) is the U.S. United States federal court, federal court with appellate jurisdiction over the United States district court, courts in the following United Stat ...
Dennis Muhammad ''et al''. v Christine Oliver ''et al''.
07-3336, page 5, decided 10 November 2008, accessed 21 April 2024
See also
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Greenmail
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Economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
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Mergers and acquisitions
Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...
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Microeconomics
Microeconomics is a branch of economics that studies the behavior of individuals and Theory of the firm, firms in making decisions regarding the allocation of scarcity, scarce resources and the interactions among these individuals and firms. M ...
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Takeover
In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are publicly listed, in contrast to the acquisi ...
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Industrial organization
In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the per ...
References
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Mergers and acquisitions
Contract law
Takeover defense