A “don’t ask, don’t waive” provision within a mergers and acquisitions standstill agreement prohibits a potential acquirer from making any public or private requests that a target firm waive or amend the restrictions given in the standstill agreement. In other words, the target says to the acquirer “you know what the agreement is, and we’re sticking to it”.
The don’t ask, don’t wave provision is a deal protection device used primarily to enhance the ability of the target board to conduct an auction that maximizes the sale value of the firm. A merger agreement used in connection with an auction sale process will sometimes include a non-solicitation provision restricting the target board from waiving or amending any standstill agreement with other rival bidders. Therefore, the provision encourages bidders to make their best and final offer at the start. It can also prevent bidders from making a hostile takeover approach if they fail to win in the auction and consummate a friendly deal.
This provision is often included in the standstill agreement when used in conjunction with a non-disclosure agreement (NDA) during the auction bidding process for the target firm. Without access to the confidential information, a realistic bid for the target firm cannot be made. During the auction process there can be a large number of bidders involved. This exponentially increases the risks of sharing proprietary information as some of the strategic bidders will be competitors of the target organization. Therefore, protecting confidential information is of the highest importance. In order to do this, at the beginning of the process the target firm draws up a confidentiality agreement, or non-disclosure agreement (NDA). This document protects target firm proprietary information and also protects against the risk of bidders sharing information with each other. Of particular interest amongst potential acquirers is the offer price or additional key deal terms.
Don't Ask, Don't Waive Example
The following text is taken from the DEFM14A – Definitive proxy statement relating to merger or acquisition filing with the SEC made by The Meet Group (MEET) on April 22, 2020 in relation to the proposed takeover by ProSiebenSat.1 Media
On December 11, 2019, the Company entered into a confidentiality agreement with Company B’s private equity sponsor, which confidentiality agreement was on a form prepared by the Company specifically for the outreach process undertaken by BofA Securities at the direction of the Company beginning in late November 2019 and contained customary provisions, including a standstill provision that prohibited Company B’s private equity sponsor and certain of its affiliates from, among other things, offering to purchase shares of, or offering to acquire, the Company for nine months, except when invited to do so by the Company Board or any special committee thereof and contained so-called “don’t ask, don’t waive” language. The standstill provision, including the “don’t ask, don’t waive” language, terminated upon the Company’s announcement that it had entered into the Merger Agreement.
In this document, references are clearly made to the use of the don’t ask, don’t waive principle. Once the sale process has been agreed upon with the acquirer there is no longer and need for the standstill agreement. At this point, the acquirer proceeds towards completion of the acquisition of the target firm.
