Standstill Agreement

AAA

DEFINITION of 'Standstill Agreement'

1. A contract that stalls or stops the process of a hostile takeover. The target firm either offers to repurchase the shares held by the hostile bidder, usually at a large premium, or asks the bidder to limit its holdings. This act will stop the current attack and give the company time to take preventative measures against future takeovers.

2. An agreement between a lender and borrower in which the lender stops demanding the repayment of the loan. A new deal is negotiated, usually altering the loan's original repayment schedule. This is used as an alternative to bankruptcy or foreclosure when the borrower can't repay the loan.

INVESTOPEDIA EXPLAINS 'Standstill Agreement'

1. When a target firm enters a standstill, its shareholders are usually displeased. Because the takeover is being blocked, any possible value created from the merger will be lost. Usually, share prices rise on news of a takeover. If a standstill agreement is reached, the stock value should fall to its previous level.

2. The standstill agreement allows the lender to salvage some value from the loan. In a foreclosure, the lender may receive nothing. By working with the borrower, the lender has a chance of being repaid.

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  4. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  5. Target Firm

    A company which is the subject of a merger or acquisition attempt. ...
  6. Premium

    1. The total cost of an option. 2. The difference between the ...
Related Articles
  1. War's Influence On Wall Street
    Bonds & Fixed Income

    War's Influence On Wall Street

  2. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  3. Trade Takeover Stocks With Merger Arbitrage
    Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

  4. Pinpoint Takeovers First
    Options & Futures

    Pinpoint Takeovers First

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center