What Is a Standstill Agreement?
A standstill agreement is a contract that contains provisions that govern how a bidder of a company should buy, put off, or vote stock of the target company. A standstill agreement can effectively stall or prevent the process of a adversarial takeover if the occasions can’t negotiate a pleasing deal.
The agreement is particularly vital given that bidder may have had get entry to to the target company’s confidential financial wisdom.
Key Takeaways
- A standstill agreement is a contract that contains provisions that govern how a bidder of a company should buy, put off, or vote stock of the target company.
- A standstill agreement can effectively stall or prevent the process of a adversarial takeover if the occasions can’t negotiate a pleasing deal.
- A company that comes beneath pressure from an aggressive bidder or activist investor finds a standstill agreement helpful in blunting the unsolicited method.
Understanding Standstill Agreements
A company that comes beneath pressure from an aggressive bidder or activist investor finds a standstill agreement helpful in blunting the unsolicited method. The agreement provides the target company further keep an eye on over the deal process by the use of prescribing the bidder or investor’s capacity to buy or advertise the stock of the company or unencumber proxy contests.
A standstill agreement can also exist between a lender and borrower when the lender stops tricky a scheduled value of interest or very important on a loan so to give the borrower time to restructure its liabilities.
A standstill agreement is a kind of anti-takeover measure.
Inside the banking world, a standstill agreement between a lender and borrower halts the contractual repayment schedule for a distressed borrower and forces sure actions that the borrower must undertake.
A brand spanking new deal is negotiated all over the standstill length that the majority continuously alters the loan’s unique repayment schedule. This is used as an alternative choice to bankruptcy or foreclosure when the borrower can’t repay the loan. The standstill agreement we could within the lender to salvage some price from the loan. In a foreclosure, the lender may download no longer the rest. By means of running with the borrower, the lender can support its possibilities of getting repaid a portion of the exceptional debt.
Example of a Standstill Agreement
A modern example of two companies that signed such an agreement is Glencore plc, a Swiss-based commodities broker, and Bunge Ltd., a U.S. agricultural commodities broker. In Would possibly 2017, Glencore made a casual method to buy Bunge. Shortly after, the occasions reached a standstill agreement that prevents Glencore from collecting shares or launching a correct bid for Bunge until a later date.
In 2019, the net sport retailer GameStop signed a standstill agreement with a group of patrons who wanted changes inside the company’s governance, believing the company had further intrinsic price than the stock’s price reflected.
Other Standstill Agreements
In numerous areas of commercial, a standstill agreement can also be as regards to any agreement between occasions during which each and every comply with pause the topic to hand for a decided on time frame. This can also be an agreement to lengthen scheduled expenses to have the same opinion a industry local weather difficult market necessities, agreements to stop producing a product, agreements between governments, or many various varieties of arrangements.
