Types of lock-up arrangements
These provisions may take the form of *(i) break-up/termination fees, *(ii) options given to target shareholders to buy target stock, *(iii) rights given to bidder shareholders to purchase target assets, *(iv) force the vote provisions in merger agreements, and *(v) agreements with major shareholders (voting agreements, agreements to sell shares or agreements to tender). In a stock lock-up, the bidder is able to either purchase 1) authorized but unissued shares of the major or controlling stockholder, or 2) the shares of one or more large stockholders. The acquirer holds the option to exercise the shares at a higher price in the event of sale to a higher bidder, or to vote in favor of the acquirer’s bid. An asset lock-up occurs when the target firm grants an option for the acquisition of an asset. This is also known as a crown jewel lock-up.Legal system vs. lock-up provisions
In many cases, lock-up provisions may impede “free competition”, and thereby restrict theSee also
* Poison pill *