Best Efforts

Best Efforts

An agreement an underwriter makes to act as an agent between an issuing company and investors.

Notes:

In a best efforts agreement, the underwriter agrees to use all efforts to sell as much of an issue as possible to the public. The underwriter can purchase only the amount required to fulfill its client's demand or the entire issue. However, if the underwriter is unable to sell all securities, it is not responsible for any unsold inventory.

Best effort agreements are used mainly for securities with higher risk, such as unseasoned offerings.

See also: Agent, Bought Deal, Firm Commitment, IPO, Negotiated Underwriting, Standby Underwriting, Underwriting, Unseasoned Security

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Best efforts

A high standard of undertaking, but nevertheless excusable in the event of a force majeure.