Tag-Along Rights

See: Co-Sale Rights.

Whatever.com raised $6 million from outside investors. One of them put in $1 million; the other put in $5 million. Microsoft wants to own a big chunk of the company. They don't want to buy it outright yet, but they'd love to own 23%, because that would entitle MSFT to a board seat (the codicles of the Board say that anyone owning over 20% of the stock gets a board seat and is able to then inspect every secret the company proffers). That $5 million investor gets MSFT to pay $30 a share for their stake, which they bought for $4 a share. But it was only those shares that MSFT signed up to buy.

Luckily for the smaller, $1 million investor, they had tag-along rights. So MSFT, if it wanted to buy 100% of the big investor's stake, had to then also buy 100% of the smaller investor's stake. Had it been a buy of, say, only 80% each, then so be it; the tag along right allows the smaller, minority investor to "tag along" under the same deal terms as the larger investor.

Big guy. Little guy.