What is the maximum duration for a right of first refusal (ROFR) agreement?

A right of first refusal (ROFR) is a contractual agreement that provides one party the opportunity to purchase an asset before the owner sells it to a third party. The maximum duration for a ROFR agreement can vary based on specific circumstances and applicable laws. However, within financial markets and investment banking practice, three years is commonly recognized as a standard maximum duration for such agreements.

This timeframe allows sufficient opportunity for the party holding the ROFR to exercise their right without extending the contractual constraints indefinitely, which could potentially hinder the seller's ability to capitalize on market opportunities. Allowing a longer duration, such as five years, could raise concerns regarding the enforceability of the agreement and the implications it may have on the seller's ability to conduct business.

Therefore, three years serves as a reasonable compromise, protecting the interests of both parties involved while maintaining a practical balance in the marketplace.