Drag-Along, Tag-Along, and Other Transfer Restrictions in M&A: Negotiating and Drafting Strategies, Avoiding Pitfalls

Private companies often take advantage of restrictions on the right of an equity owner to transfer their equity, using language in organizational agreements tied to drag-along restrictions, transfers requiring board consent, the requirement to offer a ROFO or ROFR, and other requirements to permit other equityholders to tag-along on the transfer to control the make-up of the investor group and the timing and manner in which investors exit. These provisions become more complicated as more sophisticated investors invest in the same target. 

Tag-along, drag-along, ROFO, and ROFR provisions raise several substantive and procedural issues for investors. In negotiating and drafting these provisions, investment partners and their counsel must consider how these provisions impact future transactions and transfers.

Listen as our authoritative panel discusses organizational documents for private companies, with particular focus on the nuances of tag-along, drag-along, ROFO, ROFR, and other transfer restrictions.