Term Sheets: Tag Along Rights

Tag Along (Co-Sale) Rights gives the shareholders (usually minority) the right but not necessarily the obligation to join (or what we call tag along) in the sale of the company (or accept an offer) when the other remaining shareholders (usually majority) is exiting, under the same price and terms.

Purpose: This is used in deal making to help avoid any shareholder involuntarily finding themselves with a different (or difficult) co-shareholder than originally expected. And (in some cases) also to take advantage of the control premium being offered (e.g. Buyers maybe prepared to pay a higher price per share when they acquire control of a company). These are often requested by minority shareholders as a safeguard.