What is exclusivity?

Exclusivity is a term used in the sale of a business. It refers either to an agreement that the broker who introduced the buyer to the seller has the right to be paid a success fee or to an agreement that the seller cannot look for an alternative buyer once the sale is agreed.

Where have you heard about exclusivity?

As an investor you may have come across mentions of exclusivity clauses when reading annual reports of the companies in which you are invested or when you receive a circular from that company detailing a business acquisition or disposal.

What you need to know about exclusivity.

Exclusivity agreements are designed to bind one party in a business transaction - the seller - to the other two parties, the buyer and the broker.

With regard to the buyer, the seller is bound not to seek an alternative buyer after a letter of intent has been signed, provided the deal goes ahead. Regarding the broker, exclusivity agreements prevent the seller, once a buyer has been found, from breaking the previous commitment to pay a success fee.