From what I am reading, the tag along drag along provision (with regard to private equity) says that firm management (which are shareholders in the company) are offered the right to an acquisition of the company.
In one of the practice exams, I am reading that the firm has a right to sell its equity stake in the company upon the sale of the stake by private equity owners (which falls under the tag along drag along provision).
How does the first definition of the tag along drag along clause translate into the second definition?
Tag-along rights, also referred to as “co-sale rights,” are contractual obligations used to protect a minority shareholder, usually in a venture capital deal. If a majority shareholder sells his take, it gives the minority shareholder the right to join the transaction and sell his minority stake in the company.
I don’t think it has to pertain to managers specifically. It can pertain to any minority shareholder. The CFAI material is saying managers often get tag along drag along.