Best Efforts

An agreement in which an underwriter promises to make a full-fledged attempt to sell as much of an initial public offering as possible to the public. Best effort agreements are used mainly for securities with higher risk, such as unseasoned offerings, or in less-than-ideal market conditions.

Best efforts relieve underwriters from responsibility for any unsold inventory in the event that they are unable to sell all the securities. The underwriter does not guarantee that it will sell the entire IPO issue in a best efforts agreement. Such an agreement limits the underwriter's risk, but also limits the underwriter's upside because it receives a flat fee for its services.

Underwriters and issuers can handle IPOs in different ways. In contrast to a best-efforts agreement, a bought deal requires the underwriter to purchase the entire IPO issue and the underwriter's profit is based on how many shares it sells, and the spread between the discounted purchase price and the sale price of the shares to the public.


Investment dictionary. . 2012.

Look at other dictionaries:

  • best-efforts — UK US noun [plural] ► (also best endeavours) LAW the greatest possible effort to achieve something or do something, especially when this is difficult: use your best efforts to do sth »The buyer shall use his best efforts to get an acceptable… …   Financial and business terms

  • best efforts — n. Diligence beyond a mere good faith effort to fulfill an obligation. See also good faith, diligence. Webster s New World Law Dictionary. Susan Ellis Wild. 2000 …   Law dictionary

  • best efforts — A high standard of undertaking, but nevertheless excusable in the event of a force majeure. Bloomberg Financial Dictionary * * * best efforts ˌbest ˈefforts adjective [only before a noun] 1. FINANCE a best efforts arrangement is one in which a… …   Financial and business terms

  • best efforts — noun a) An assurance of good faith effort to achieve best results under prevailing circumstances. b) An effort to sell securities without a firm underwriting. Syn: best endeavors …   Wiktionary

  • Best efforts — …   Википедия

  • best-efforts — ¦ ̷ ̷ ¦ ̷ ̷  ̷ ̷ adjective of security underwriting : not involving a firm commitment on the part of an underwriter to take up any unsold shares or bonds of an issue being underwritten …   Useful english dictionary

  • best efforts offering — USA I best efforts deal, Also known as best efforts offering. A bank loan financing where an agent bank agrees to use its best efforts (or commercially reasonable efforts) to arrange a syndicate of lenders that will make the loan but has no… …   Law dictionary

  • best efforts underwriting — USA best efforts underwriting, Also known as best efforts offering. In a best efforts underwriting, the underwriters do not agree to purchase all of the securities from the issuer. Underwriters agree to use their best efforts to sell the… …   Law dictionary

  • best efforts deal — USA best efforts deal, Also known as best efforts offering. A bank loan financing where an agent bank agrees to use its best efforts (or commercially reasonable efforts) to arrange a syndicate of lenders that will make the loan but has no… …   Law dictionary

  • Best Efforts Mortgage Lock — When the sale of a mortgage in the secondary mortgage market requires that the seller, usually a mortgage originator, make a best efforts attempt to deliver the mortgage to the buyer. This type of trade exists to transfer the risk that a loan… …   Investment dictionary

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