Standstill Agreement

What Is a Standstill Agreement?

A standstill agreement is a contract that contains provisions that oversee how a bidder of a company can purchase, discard, or vote stock of the target company. A standstill agreement can really slow down or stop the course of a hostile takeover on the off chance that the gatherings can't arrange a friendly deal.

The agreement is especially important in light of the fact that the bidder will have approached the target company's confidential financial information.

Figuring out Standstill Agreements

A company that goes under pressure from an aggressive bidder or activist investor tracks down a standstill agreement supportive in dulling the unsolicited approach. The agreement gives the target company more control over the deal cycle by endorsing the bidder or investor's capacity to buy or sell the stock of the company or send off proxy challenges.

A standstill agreement can likewise exist between a lender and borrower when the lender stops requesting a scheduled installment of interest or principal on a loan to give the borrower time to rebuild its liabilities.

A standstill agreement is a form of anti-takeover measure.

In the banking world, a standstill agreement between a lender and borrower stops the contractual repayment schedule for a distressed borrower and powers certain activities that the borrower must embrace.

Another deal is negotiated during the standstill period that typically adjusts the loan's original repayment schedule. This is utilized as an alternative to bankruptcy or foreclosure when the borrower can't repay the loan. The standstill agreement permits the lender to salvage some value from the loan. In a foreclosure, the lender might not receive anything. By working with the borrower, the lender can work on its possibilities getting reimbursed a portion of the outstanding debt.

Illustration of a Standstill Agreement

A recent illustration of two companies that consented to such an arrangement is Glencore plc, a Swiss-based commodities trader, and Bunge Ltd., a U.S. agricultural commodities trader. In May 2017, Glencore made an informal approach to buy Bunge. Not long after, the gatherings arrived at a standstill agreement that keeps Glencore from accumulating shares or sending off a formal bid for Bunge until a later date.

In 2019, the video game retailer GameStop consented to a standstill arrangement with a group of investors who wanted changes in the company's governance, accepting the company had more intrinsic value than the stock's price reflected.

Other Standstill Agreements

In different areas of business, a standstill agreement can be essentially any agreement between parties in which both consent to stop the matter in question for a specific period of time. This can be an agreement to defer scheduled payments to assist a business with enduring troublesome market conditions, agreements to stop delivering a product, agreements between legislatures, or numerous different types of arrangements.

Features

• A company that goes under pressure from an aggressive bidder or activist investor tracks down a standstill agreement supportive in dulling the unsolicited approach.
• A standstill agreement can successfully slow down or stop the course of a hostile takeover in the event that the gatherings can't arrange a friendly deal.
• A standstill agreement is a contract that contains provisions that oversee how a bidder of a company can purchase, discard, or vote stock of the target company.