A standstill agreement is a legal document that is used to temporarily suspend or delay certain actions. The term is often used in relation to business and financial transactions, such as mergers and acquisitions (M&A).
When two companies are considering a merger or acquisition, they may enter into a standstill agreement to prevent either party from taking any action that could potentially harm the other. This could include buying or selling assets, entering into new contracts, or making other major decisions.
The purpose of a standstill agreement is to allow both parties to have time to conduct due diligence and fully assess the potential benefits and risks of the transaction. It also helps to ensure that the negotiated terms of the deal are not jeopardized by any sudden or unexpected actions.
Standstill agreements typically have a specific time period during which both parties agree to refrain from taking any action that may impact the potential transaction. This can range from a few weeks to several months, depending on the complexity of the deal and the amount of due diligence required.
During the standstill period, both parties may also agree to certain obligations, such as maintaining confidential information and refraining from soliciting employees or customers from the other party.
Overall, standstill agreements are an important tool in the M&A process, as they provide a temporary pause to allow both parties to fully assess and negotiate the potential transaction before any irreversible actions are taken.