No acquisitions: Overview, definition, and example
What is no acquisitions?
No acquisitions refers to a contractual or policy-based restriction that prevents a party from acquiring, merging with, or taking control of another company during a defined period—usually the term of an agreement. It’s often used in joint ventures, strategic partnerships, or investment deals where a change in control or expansion could disrupt the original intent or introduce competitive risks.
Why is no acquisitions important?
Restricting acquisitions helps maintain the original structure and risk profile of a business relationship. It ensures that one party doesn’t gain undue influence, shift priorities, or change the competitive dynamics in a way that could harm the other party. In some cases, it also helps investors protect their position or ensures compliance with regulatory obligations tied to ownership and market structure.
Understanding no acquisitions through an example
Imagine two software companies enter a partnership to co-develop a product. If one of them acquires a competing company during the partnership, it could create a conflict of interest or disrupt the joint roadmap. A no acquisitions restriction—whether formalized in a contract or informally agreed—would prevent either party from pursuing such a deal without consent.
Example of how a no acquisitions restriction may appear in a contract
Here’s how a no acquisitions provision may appear in a contract:
"During the Term, neither party shall acquire or seek to acquire any controlling interest in a competitor of the other party, nor complete any merger or acquisition transaction that would materially impact its ability to perform under this Agreement, without the prior written consent of the other party."
Conclusion
No acquisitions is a risk management concept that helps maintain balance and stability in commercial relationships. It can appear as a formal clause or be embedded in broader governance frameworks. Businesses should consider using no acquisitions restrictions when changes in ownership or control could compromise trust, shift priorities, or introduce competitive pressure.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.