Definition of Best efforts:
Contracts: Very high standard of execution, failure to achieve which may be excusable under force-majeure clause or on demonstration that failure occurred despite ones dedicated and sustained efforts. Also called best endeavors.
Investing: Undertaking by a marketing agent (usually an investment bank) to do the very best in selling a security issue to the public, on pro-rata commission basis, without committing or specifying any quantity. Also called best efforts offering.
Law: Assurance that while a certain result is not guaranteed, good-faith efforts will be made to achieve the best result in the circumstances.
When a company decides to sell securities, it enlists the help of an investment bank to execute the sale. This is common during initial public offerings (IPOs). Both parties draw up a best efforts agreement that outlines the minimum amount of securities involved. Having an agreement lets securities issuers know exactly how much money they will raise once the offering is closed. In most cases, best effort agreements are used in less-than-ideal market conditions or when there is more risk involved, as is the case with an unseasoned offering.
The term best efforts refers to an agreement made by a service provider to do whatever it takes to fulfill the requirements of a contract. In finance, an underwriter makes a best efforts or good faith promise to the issuer to sell as much of their securities offering as possible. While the two parties come to an agreement for the sale of some securities, the underwriter doesn't guarantee to sell them all.
How to use Best efforts in a sentence?
- The opposite is a firm commitment or bought deal, in which the underwriter buys all shares or debt and has to sell it all to make money.
- It is also a general service agreement term used in place of a firm deliverable commitment.
- Best efforts is a term for a commitment from an underwriter to make their best effort to sell as much as possible of a securities offering.
Meaning of Best efforts & Best efforts Definition