Most businesses should enter into a tailored nondisclosure agreement (NDA) before sharing confidential information and entering into substantive merger discussions. The seller usually is the party who has the most at stake since the seller usually provides the most information about its business.
However, in some cases, it is equally important for the seller to obtain certain confidential information about the buyer. For example, in cases where the buyer is a privately-held company and is offering its own stock or long term debt as part of the consideration, the seller will want to obtain confidential information about the buyer’s business. In these cases, the seller is essentially making an investment decision to buy stock or debt of the buyer in exchange for the seller’s business.
A tailored NDA will define confidential information for the parties (with appropriate carveouts), restrict the use and dissemination of confidential information, govern what happens to shared confidential information upon any termination of the merger discussions, address any applicable export compliance matters, and contain disclaimers, injunctive relief provisions, and other terms appropriate for this type of NDA.
Other posts in this series (more to come):
Mergers & Acquisitions Primer | Part 1: Introduction
Mergers & Acquisitions Primer | Part 2: Overview of the acquisition process
