A “Stop, Look and Listen” announcement is a special type of communication where the reader is advised to take special note of the information contained therein. The phrase is used frequently in a variety of situations. In many cases, readers of important documents tend to lose concentration especially when reading lengthy legal documents. This may be despite their importance and significant negative effect of the reader should a misunderstanding occur. For that reason Stop, Look and Listen announcements engage the reader to pay special attention by indicating the seriousness of the content at the beginning whilst the reader is most alert.
In finance, especially mergers and acquisitions a Stop, Look and Listen communication is referred to in the Security Exchange act of 1934. It sets out the circumstances under which the section will not apply when the target company communicates with its shareholders.
Stop, Look Listen Example
The following text is taken from the Form PREM14A Preliminary proxy statement relating to merger or acquisition filing made by Forescout Technologies (FSCT) with the SEC on March 3, 2020 in relation to the proposed takeover by private equity firm Advent International Corporation
The Forescout Board’s Recommendation; Board Recommendation Change
The Forescout Board has recommended that the holders of shares of common stock vote “FOR” the proposal to adopt the merger agreement. Under the merger agreement, except as set forth below, at no time after the date of the merger agreement may the Forescout Board (or a committee thereof):
- take or fail to take any formal action or make or fail to make any recommendation or public statement in connection with a tender or exchange offer, other than a recommendation against such offer or a “stop, look and listen” communication by the Forescout Board (or a committee thereof) to Forescout stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any substantially similar communication) (it being understood that the Forescout Board (or a committee thereof) may refrain from issuing a recommendation against such tender or exchange offer until 5:30 p.m., Eastern time, on the 10th business day after the commencement of a tender or exchange offer in connection with such acquisition proposal without such action being considered a violation of the merger agreement);
For the sake of completeness, LII > Electronic Code of Federal Regulations (e-CFR) > Title 17 Commodity and Securities Exchanges > Chapter II SECURITIES AND EXCHANGE COMMISSION > Part 240 GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 > Section 240.14d-9(f) > Recommendation or solicitation by the subject company and others, is reproduced below
(f) Stop-look-and-listen communication. This section shall not apply to the subject company with respect to a communication by the subject company to its security holders which only:
(1) Identifies the tender offer by the bidder;
(2) States that such tender offer is under consideration by the subject company’s board of directors and/or management;
(3) States that on or before a specified date (which shall be no later than 10 business days from the date of commencement of such tender offer) the subject company will advise such security holders of (i) whether the subject company recommends acceptance or rejection of such tender offer; expresses no opinion and remains neutral toward such tender offer; or is unable to take a position with respect to such tender offer and (ii) the reason(s) for the position taken by the subject company with respect to the tender offer (including the inability to take a position); and
(4) Requests such security holders to defer making a determination whether to accept or reject such tender offer until they have been advised of the subject company’s position with respect thereto pursuant to paragraph (f)(3) of this section.
