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Standstill Agreement Definition Finance

A status quo agreement is an agreement between a potential acquirer and a target entity that limits the purchaser`s ability to increase its interest in the target company. The agreement can be used to terminate a hostile acquisition attempt, usually at the price of a cash payment to the potential purchaser, which involves a surtax buyback of the shares already held by the purchaser. Or the target company may grant a seat on the purchaser`s board of directors in exchange for the absence of an increase in its holdings. 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. Tiffany C. Wright has been writing since 2007. She is a business leader, interim CEO and author of Solving the Capital Equation: Financing Solutions for Small Business. Wright has helped companies secure more than $31 million in financing. She has a master`s degree in finance and business management from the Wharton School at the University of Pennsylvania.

In other areas of activity, a status quo agreement can be virtually any agreement between the parties, in which both parties agree to discontinue the case for a specified period of time. This may include an agreement to defer payments to help a company in difficult market conditions, agreements to stop the production of a product, agreements between governments or many other types of agreements. The agreement is particularly relevant because the bidder would have access to the confidential financial information of the entity concerned. After receiving the commitment of the potential purchaser, the target entity has more time to set up additional defence facilities for the acquisition. In some situations, the target entity agrees to repurchase shares of the target with a premium in return for the potential purchaser. Suppose a business has a line of credit when it already has a long-term loan from a bank. This line of credit includes an agreement or subordination clause as part of the loan supporting documents. In the event of a default, the long-term lender is initially entitled to assets; The Equity Line lender has a second right. A status quo agreement can be reached between governments for better governance.

As a hostile anti-opaque defense mechanism, the target company can obtain a promise from an unfriendly bidder to limit the amount of shares the bidder can buy or hold in the target company. This gives the target company time to implement other acquisition defence strategies. In return, the target entity may repurchase the equity holdings of the potential purchaser on the target share with a premium. The target company may offer another incentive, such as. B a seat on the board of directors. A status quo agreement can also be an agreement between the parties not to deal with other parties for a specified period of time during negotiations.