Legal Blog

M&A Nuggets: The Drag-Along

In a sale structured as a stock purchase, most acquirors want to purchase one hundred percent of the ownership interests in the seller.  That is why, if a seller has any minority owners, it is important to include a drag-along clause in the agreement among the owners of the seller.  A drag-along clause basically states that if owners holding a certain percentage of the ownership agree to a sale, the owners can require the remaining owners to participate in the sale.  The use of the drag-along clause prevents a minority owner from in effect vetoing a sale by not agreeing to sell. Several details need to be included in the drag-along clause, including the percentage needed to approve the sale and to drag-along the non-approving owners, whether the non-approving owners have the right of first refusal to purchase the company on the same terms offered by the third party and whether the drag-along right applies initially or at some future date.  The big picture here is that the simple step of including drag-along rights in the ownership agreement helps to ensure the sale of one hundred percent of a company.


If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at or 443-738-1522.


ABOUT GLENN D. SOLOMON | 443-738-1522

Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.