Neighbouring group participation: alpha-lactone formation
NOTE: Important charges and non-bonding electrons are shown throughout the animation except during the transition phase. Silver has been omitted from the 3D animation.
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Nucleophilic substitution reactions that go with retention of stereochemistry are rather rare and most likely go through two successive inversions with neighbouring group participation. The neighbouring group is carboxylate: the silver oxide is important because it encourages the ionization of the starting material by acting as a halogen-selective Lewis acid. A three-membered ring intermediate forms, which then gets opened by hydroxide in a second SN2 step.