Paramount’s proposed merger with Skydance has been the most tumultuous media deal in years. Now it has taken yet another turn after the exclusivity period for negotiations expired without an agreement in hand.

A month ago, a special committee of Paramount’s board agreed to enter into exclusive talks with Skydance — a Hollywood studio run by the tech scion David Ellison — even as the private equity giant Apollo Global Management reached out with a $26 billion offer. Paramount shareholders grumbled that granting exclusivity was a mistake, and that the company should have engaged with Apollo instead.

This week, the special committee told Skydance that it was letting the exclusivity period lapse. The end of exclusivity doesn’t alone kill the deal with Skydance. But it does allow Paramount to open up negotiations with Apollo and Sony Pictures Entertainment, which joined Apollo’s bid.

The so far fruitless negotiations raise a question that deal makers have long debated: Why do companies like Paramount agree to exclusivity in the first place?

Buyers often prefer exclusivity more than sellers. Exclusivity is a sign from the seller that it is committed to doing a deal and not just using a bid to drum up higher offers.

Sellers generally prefer to negotiate without exclusivity because it limits their ability to shop around for a higher price. And since they’ve already signaled to a buyer they’re willing to make a deal, they’ve weakened their bargaining power.


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