A clause granting minority shareholders the right to join a sale initiated by the majority shareholder, on the same terms and at the same price per share.
In multi-shareholder company transactions, minority protection is one of the most delicate negotiations. The tag-along right — also known as a co-sale right or piggyback right — is the contractual tool that prevents the majority shareholder from selling their stake and leaving the minority trapped with a new partner they did not choose.
A tag-along is a clause included in the shareholders’ agreement or the company’s articles of association that grants the minority shareholder the right to join a sale negotiated by the majority shareholder with a third party, on the same economic and legal terms. If the majority shareholder sells their shares to a buyer at a given price and under specific conditions, the minority can demand that the buyer also acquire their stake at the same price per share and on the same terms.
The logic is straightforward: if the majority shareholder has found an attractive exit, the minority should not be held captive in a company whose ownership has fundamentally changed. The tag-along ensures the exit door is open for everyone.
The typical tag-along mechanism follows these steps:
Notification. The majority shareholder informs the minority of their intention to sell, specifying the proposed buyer, price, conditions, and timeline.
Exercise of the right. The minority has a set period (usually 15 to 30 days) to decide whether to exercise their tag-along right and join the sale.
Joint sale. If the minority exercises the right, the majority must ensure the buyer also acquires the minority’s shares. If the buyer refuses, the transaction cannot close (unless the clause allows the majority to sell independently under certain conditions).
Pro-rata allocation. If the buyer only wants to acquire a limited number of shares, the tag-along usually includes a pro-rata clause: majority and minority sell proportionally to their respective stakes.
For the minority shareholder, the tag-along is their primary safeguard against the risk of being locked in with an unknown partner. Without this clause, the majority could sell to a private equity fund, a direct competitor, or an investor with a completely different strategy, leaving the minority without liquidity and without influence.
For the buyer, the existence of a tag-along is relevant because it may increase the deal size. If the buyer only intended to acquire the majority stake and the minority exercises the tag-along, the buyer faces the obligation to acquire 100% of the share capital (or abandon the deal).
For the majority shareholder, the tag-along is a constraint on their freedom to sell, but a reasonable one. In practice, many buyers prefer to acquire 100% of the capital, so the tag-along facilitates a clean and orderly exit.
An industrial company in eastern Spain has two shareholders: the founder with 70% and a family office with 30%. A multinational group offers the founder 15 million euros for the 70% stake, implying a valuation of 21.4 million for 100% of the capital.
The family office, which invested five years ago, exercises its tag-along right and demands to sell its 30% at the same price per share. The buyer agrees to acquire 100% for 21.4 million. The founder receives 15 million and the family office 6.4 million.
Without the tag-along clause, the founder could have sold the 70% and the family office would have remained as a minority shareholder of a multinational, with limited influence and no clear exit horizon.
Tag-along protects the minority by giving them the right to sell alongside the majority; drag-along protects the majority by allowing them to compel the minority to sell. They are complementary clauses typically negotiated together in the shareholders’ agreement.
It is not legally required, but it is a standard clause in M&A transactions and in shareholders’ agreements with financial investors. Its absence is usually a red flag for a prospective minority investor evaluating an entry into the company’s capital.
It typically triggers when the majority shareholder sells above a defined threshold (usually 50% or control of the company). Minor transfers or intragroup transactions are usually excluded, provided the acquirer assumes the same obligations under the agreement.
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