When selling a privately-held company, at some point in the deal process you will have to enter an exclusivity or “no shop” period. At this stage in the process, you’ve narrowed down your buyer pool to the most attractive buyer and have signed a letter of intent.
During the exclusivity period, you agree not to carry out further talks with other interested parties. This gives the buyer time to carry out due diligence and complete all the necessary legalities that go into purchasing a business.
The due diligence process is time-consuming and expensive for a buyer, so exclusivity provides a good sense of assurance that you are moving forward with them. I’ve seen some smaller deals go to closing without exclusivity, but once you’re in the lower middle market there’s too much cost involved for buyers to proceed without it.