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Checklist for Protecting Confidential Information in Mergers & Acquisitions

Checklist for Protecting Confidential Information in Mergers & Acquisitions

15th May, 2019

When dealing with mergers and acquisitions, certain precautions should be taken in order to ensure that confidential information is adequately protected as there are likely to be considerable volumes of confidential information that need to be exchanged between the buyer and seller.

We hope that integrity and trust go a long way in any business transaction, but sometimes and unfortunately, they are not enough to keep a prospective deal confidential and the leak of proprietary and non-public information can be disastrous for a business.

The following is a checklist that can help protect confidential information:

  • Correctly identifying information, the release of which may be governed or restricted by law.
  • Reviewing contracts for pre-existing confidentiality agreements.
  • Isolating critical information based on its sensitivity.
  • Marking confidential information as such.
  • Considering additional security measures for particularly critical information.

Whenever information is to be disclosed, further precautions should be taken, including:

  • Establishing controls to restrict internal disclosure of confidential information (for example, subjecting employees and advisers to confidentiality obligations).
  • Appointing one person to manage disclosure.
  • Establishing a policy that potential buyers sign a confidentiality agreement before any information is disclosed to them.
  • Developing a plan to deal with potential leaks of confidential information.

While naming the correct parties to a confidentiality agreement may seem obvious, certain scenarios may call for additional consideration:

  • If the potential buyer is part of a group, the group should be joined as a party.
  • In certain situations, there may be third parties (for example, the potential buyer's employees) who should also be bound to a confidentiality agreement.
  • When the acquisition is through a share purchase, it may be wise to join the target company as a party.

There are certain formalities to be complied with when it comes to signing

  • Person signing the agreement must have the requisite authority.
  • Consideration must be present or future; must be adequate; and must be given by the correct person (if in doubt, it is prudent to execute the agreement as a deed).
  • Check for other formalities imposed by local law.

Confidentiality agreements require the parties to take on many principal undertakings. These include:

  • Keeping confidential information confidential (i.e., only disclosing the information as permitted).
  • Copying the information only as permitted (and keeping a record of all copies made).
  • Using the information for permitted purposes only.
  • Avoiding inadvertent disclosures.
  • Ensuring that third party recipients keep the information confidential.
  • Delivering or destroying information and copies upon request.

In order to ensure that the parties are able to perform their responsibilities, the following considerations should be included, in some form, in the agreement:

  • Specification of persons to whom disclosure is permitted (for example, officers and employees, professional advisers and consultants, banks and potential investors).
  • Specification of persons to whom disclosure is permitted (for example, officers and employees, professional advisers and consultants, banks and potential investors).
  • The possibility of forced disclosure.
  • A clear definition of the purpose for which information may be used.
  • Specification of the duration of specific undertakings.
  • All undertakings should be reasonable (and not constitute a restraint of trade); and
  • Non-solicitation undertakings should not infringe competition rules (in terms of duration or geographical extent).

And finally, in order to execute the agreement, it should be dated and signed by a duly authorised representative of each party, in duplicate, such that each party keeps a signed copy for their records.

About the Author
Elahe Ghazinoori


Elahe Ghazinoori founded EMG Associates, a legal consultancy firm, in 2006 having formerly practiced as an in-house solicitor for a telecommunications company. As EMG Associates' principal presenter, she has a wealth of experience in providing inspiring and engaging training sessions.

Elahe has trained hundreds of lawyers and legal professionals around the world on subjects such as company law, commercial law, contract law, drafting skills, partnership law, insolvency and bankruptcy law, corporate finance, intellectual property and dispute resolution.

Elahe lectures for BPP Law School in their Legal Practice department on subjects such as business law and private company acquisitions. She also worked as a senior training consultant for over 5 years for one of the world’s largest corporations, American Airlines.

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