RIGHTS OF FIRST OFFER (ROFOs): SECURING YOUR OPPORTUNITY TO BUY

For businesses and investors in Colorado’s dynamic real estate market, safeguarding future opportunities and retaining control over crucial assets is of utmost importance. Without clear, legally enforceable mechanisms, valuable assets or critical ownership stakes could be offered to external competitors before you even have an opportunity to bid.

The Right of First Offer (ROFO) serves as a powerful tool to secure your strategic interests. The ROFO proactively positions you, the "holder," at the absolute front of the line, granting you the exclusive opportunity to initiate the bidding process before the asset's owner can ever approach external buyers. At GLO, we specialize in meticulously drafting and negotiating ROFO agreements, ensuring that your right to acquire key assets is secured, strategic alignment among partners is fostered, and your long-term business objectives are robustly protected.

Understanding Rights of First Offer

The intricacy of the Right of First Offer primarily arises from the necessity of meticulous contractual drafting to precisely define its operational mechanics, as ambiguities can result in substantial disputes and even litigation. Key issues demanding careful consideration include the notice requirements: precisely what information must be shared, when, and how to effectively trigger the ROFO. The offer window, the timeframe within which the holder must respond, also requires negotiation to strike a balance between the holder’s due diligence needs and the owner’s desire for a swift sale. Additionally, the contract must explicitly state whether the parties are obligated to negotiate in good faith once an offer is made. Perhaps most critically, the agreement must define the consequences if the ROFO holder declines or negotiations fail. Owners often wish to market the asset widely, but typically, they are restricted from offering it to third parties on terms more favorable than those initially presented to the ROFO holder. If such more favorable terms are later offered, the ROFO clause might “retrigger,” forcing the owner to return to the original holder, causing significant delays and uncertainty in the sale process. Working with a skilled lawyer can assist in successfully navigating these requirements. To understand the flip side of things, read Rights Of First Refusal (ROFR): Your Pre-Emptive Right To Property.

The Chilling Effect on Market Interest

While a Right of First Offer (ROFO) is intended to provide the holder with an initial advantage, its very existence can deter potential third-party buyers from investing time and resources in evaluating an asset. Knowing that a preferred party already has the right to make the first offer, and potentially matching any subsequent offers (even if not explicitly stated, it’s a common perception), can lead external buyers to believe that their efforts might ultimately be futile. This perception can result in fewer competitive bids, lower initial offers from interested parties, or a general reluctance to engage in serious negotiations, as they anticipate merely serving as a “stalking horse” for the ROFO holder. Consequently, the owner might find themselves in a less competitive selling environment, potentially receiving a lower price for their asset compared to what they would have in an unencumbered market.

How GLO Can Help

GLO offers expert legal advice to both grantors and holders of Rights of First Offer. We carefully draft and review ROFO clauses to ensure clarity on notice requirements, offer windows, negotiation terms, and triggering conditions, thereby preventing future disputes. For asset owners, we strategically structure ROFOs to minimize market disruption and maximize sale value. For ROFO holders, we ensure the right provides a genuine competitive edge. Whether negotiating, enforcing, or defending a ROFO, GLO's expertise helps you navigate these complex provisions, protecting your interests and securing advantageous terms in critical business transactions.

Contact GLO today to ensure your Right of First Offer is precisely structured, enforceable, and aligned with your business or investment strategy.

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