To take a promising idea or activity to the next level, a company usually needs to share its precious secrets with strategic partners or potential investors. The signing of an effective confidentiality agreement (“NDA”) can therefore be a critical step in the development of a new relationship or business opportunity by offering a growing company enough comfort to take this first step. If the parties are just beginning to discuss a possible agreement or agreement, an NDA may or may not be appropriate. However, as parties immerse themselves more deeply in due diligence and negotiations, they should establish a formal NDA before exchanging sensitive information. The extent of an NDA depends on the nature of the information disclosed, the purposes for which it is disclosed, and the need for that information to remain confidential in the long term. Confidentiality agreements are available in two basic formats: a unilateral agreement or a mutual agreement. The disposable agreement is used when a single page shares confidential information with the other party. The NDA form is applicable to situations in which each site may exchange confidential information. Often, a reciprocal NDA form offered by the other party is based on a business-oriented NDA that is not tailored to the M&A context.
In an enterprise M&A scenario, a legal due diligence audit of the target company is now the norm. During the audit, confidential information about the target company itself and its business relationships is passed on to the buyer. In order to meet the interests of sellers and buyers, the parties usually enter into a confidentiality agreement (NDA). One of the tricky things here is thinking about whether other people or companies should also be bound by the agreement. Does the recipient expect to display the confidential information to a related or related company? To an associate? Towards a source of funding? To an agent or advisor (for example. B advisor and accountant) ? If so, the NDA should also cover such third parties or provide a mechanism for such third parties to be subsequently linked to the NDA. Track the information you provide: The seller must follow the information provided to a potential buyer in order to obtain a record of the materials that will be disclosed to the buyer and to provide a defense against any claims of the buyer after conclusion. Online data spaces are a useful tool for securely disclosing, controlling, and tracking due diligence documents.
The disclosure of confidential information during a due diligence audit may vary depending on the transaction structure being considered, in order to meet both the potential buyer`s interest in information and the potential seller`s confidentiality obligations. Make sure you have a confidentiality agreement: Before providing information to a potential buyer, make sure you have a confidentiality agreement. It may happen that you already have an NDA with the potential buyer as part of your existing business agreements. Don`t rely on this NDA. It may not offer the right scope, may have a limited residual lifespan, or may not contain provisions recommended as part of a sales process.