Glossary
Exclusivity
A period, agreed between buyer and seller, during which the seller will not negotiate with or provide information to other potential buyers. Usually granted after heads of terms, to give the buyer confidence to invest in due diligence.
In plain English
Due diligence and legal work cost a buyer money and time. Before committing to that, buyers usually ask the seller to stop talking to anyone else for a set period, often several weeks or a few months. That is exclusivity, sometimes called a lock-out. It is commonly agreed alongside heads of terms and is often one of the few legally binding parts of that document.
Why it matters
For the seller, exclusivity is the point at which competitive tension ends and use shifts to the buyer. If the buyer later seeks to reduce the price or change terms, the seller's alternatives have gone cold. For that reason, sellers and their advisors try to resolve the important commercial points before granting exclusivity, keep the period as short as is realistic and make it conditional on the buyer progressing.
What to watch for
- Agree the main terms, including structure and the enterprise-to-equity bridge, before exclusivity, not after.
- Keep the period proportionate to the work required, with the option to end it if the buyer stalls.
- Be confident in the buyer's funding, approvals and intent before granting it.
- Understand what the seller may and may not do during the period, for example responding to unsolicited approaches.
Transaction language and legal treatment depend on the agreement and the jurisdiction. Written by Motion Advisory Partners as general guidance, not legal advice.