Standstill Agreement Takeover Defense

Category: Allgemein

A status quo agreement is an agreement that preserves the status quo. It is an agreement between the objective and the bidder that prevents the bidder from making an offer to purchase the target without first obtaining its approval. It can be added as a provision in the confidentiality agreement and will be executed before obtaining due diligence material. A status quo agreement aims to prevent hostile bids and provides a possible remedy in case the bidder uses confidential information to make a hostile offer if the parties fail to reach a mutual agreement on the terms of sale. Ordinary shareholders tend not to like status quo agreements because they limit the potential returns of a buyout. It is important to note that these agreements are unique and can be specifically tailored to each situation. Traders need to make sure they understand the relevance of each point by point. When a status quo agreement is negotiated, it tends to have a negative effect on the spread of merger arbitration. By reducing the likelihood of an agreement being reached (DCP), the potential returns of a buyback will increase as the merger develops.

In banking, a status quo agreement between a lender and a borrower terminates the contractual repayment plan of a struggling borrower and imposes certain steps that the borrower must take. A status quo agreement is a form of anti-support measure. As a temptation to do nothing, the target company can promise to repurchase the equity holdings of the potential acquirer on the target share with a premium. (This is also called greenmail and is no longer generally allowed). The objective may also allow the bidder (limited) access to the financial information of the target entity as part of a confidentiality agreement. In the following example of status quo agreements, the target company proposes to amend the Shareholder Rights Plan (Poison Pill) if the bidder enters into the agreement. This indicates an agreement that has never been truly hostile, but could be concluded if the negotiations were discussed in depth. In 2019, video game distributor GameStop signed a status quo agreement with a group of investors who wanted changes in corporate governance, believing that the company had intrinsic value when the share price reflected. Prior to their accession to the new territories, a status quo agreement was negotiated between India and Densern and the princely states of the British Indian Empire.