Effective Post-Signing Market Check or Window Dressing? The Role of Go-Shop Provisions in M&A Transactions

This paper examines the use of go-shop provisions in M&A. We find that go-shop deals tend to have higher deal premiums and receive more competing bids while the length of the go-shop period does not affect deal premium and competition. Also, deals are less likely to be completed when a go-shop provision is included and when the go-shop length is longer. However, go-shops have no effect on the completion of high premium deals. We also find that the presence of a go-shop provision leads to a positive market reaction to deal announcements. Overall, our findings support the proposition that go-shops reflect the efforts of target managers to fulfill the Revlon duties in the form of a post-signing market check, which is consistent with stewardship theory.