What is Exclusivity in business sales?

kamfaulkner
Oct 2
3 min read

When buying or selling a business, one word crops up early in negotiations: exclusivity. It’s often tucked away in heads of terms, or raised by lawyers during deal discussions.

But what does it really mean, and why does it matter to you as a business owner or buyer?

What is exclusivity?

In plain English, exclusivity means that for a set period of time, the seller agrees not to talk to or negotiate with anyone else about selling the business.

For a buyer, it gives breathing space to carry out due diligence, arrange finance, and agree deal terms without worrying about being gazumped.
For a seller, it means taking the business “off the market” for that period and committing not to shop around for rival bids.

Exclusivity agreements (sometimes called “lock-out”, “shut-out”, or “no-shop” agreements) are common in private company share or asset sales.

Why does exclusivity matter?

What exclusivity is not

Exclusivity does not guarantee a deal will complete. It simply stops the seller from negotiating elsewhere for a set time. At the end of the exclusivity period, the seller can walk away if no binding agreement is reached.

Equally, exclusivity does not force either side to sign a final sale contract. Deals remain “subject to contract” until the formal sale and purchase agreement is signed.

Typical features of an exclusivity agreement

An exclusivity clause or letter will usually cover:

Should I grant exclusivity when selling my business?

Exclusivity is often a commercial bargaining point. Ask yourself:

Is this buyer serious and credible?
Is the proposed exclusivity period reasonable (not too long)?
Could granting exclusivity mean missing out on better offers?

For sellers, the risk is that you “take the business off the market” for weeks or months. But if the buyer is strong and the price is right, exclusivity can drive the deal forward with fewer distractions.

Should I ask for exclusivity when buying a business?

As a buyer, it’s usually sensible to insist on exclusivity before spending heavily on due diligence. Without it, you could spend tens of thousands of pounds on accountants, lawyers, and surveys, only for the seller to sell to someone else.

Think of exclusivity as an insurance policy for your investment of time and money.

A simple example

A buyer offers £2m for a manufacturing business.
The seller agrees, in principle, but also knows of another interested party.
To protect its position, the buyer insists on exclusivity for 3 months.
During those 3 months, the seller cannot speak to other buyers.
The buyer completes due diligence and secures bank finance.
The deal may still fall apart, but for those 3 months the buyer had peace of mind to proceed without interference.

Key takeaway

Exclusivity is a practical tool that helps buyers protect their investment and sellers show commitment. But it’s not a guarantee of a completed deal, and the detail matters. The length of the exclusivity period, the restrictions on the seller, and the remedies for breach should all be negotiated carefully.

Next steps

If you’re selling, think carefully before granting exclusivity: keep the period short and ensure the buyer is serious.
If you’re buying, push for exclusivity early so you can invest in due diligence with confidence.
In both cases, get tailored advice; the right terms can make a big difference to your deal.

To discuss exclusivity in your business sale or purchase, contact us 📩 info@orbitlegal.co.uk | 📞 0115 6777095 |

Disclaimer

This content is for general information only and doesn’t constitute legal, accounting, financial, or tax advice. It’s based on the law of England & Wales and was correct at the date of publication, but the law and guidance can change. Reading this page doesn’t create a solicitor–client relationship with Orbit Legal. Please take advice on your specific circumstances before acting. Get advice for your situation by contacting Orbit Legal at info@orbitlegal.co.uk or 0115 6777095.