An agreement in which a hostile bidder agrees to limit its holdings in a target company. A standstill agreement stops the takeover bid from progressing for a period of time.

A standstill agreement may also be used in a friendly transaction when a buyer or an investor in a PIPE transaction (PIPE) is restricted from purchasing the target's stock or taking any other actions that may lead to a business combination unless the target company's board and management are included in the process. These types of standstill agreements (usually contained in the confidentiality agreement) help the target company to control the deal process and prevent a hostile bid for the company after the buyer or investor has had the benefit of the target company's confidential information.

Standstill restrictions typically lapse after a period of time (commonly one to three years) or, in the case of PIPEs, when the investor owns less than a specified percentage of the target's stock (for example, 5%).