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Confidentiality Agreement




A confidentiality agreement (CA) is a legally binding contract between the target and each prospective buyer that governs the sharing of confidential company information. The CA is typically drafted by the target's counsel and distributed to prospective buyers along with the teaser, with the understanding that the receipt of more detailed information is conditioned on execution of the CA.

A typical CA includes provisions governing the following:

      
  • Use of information - states that all information furnished by the seller, whether
        oral or written, is considered proprietary information and should be treated
        as confidential and used solely to make a decision regarding the proposed
        transaction

    •   
  • Term - designates the time period during which the confidentiality restrictions
        remain in effect

    •   
  • Permitted disclosures - outlines under what limited circumstances the prospective
        buyer is permitted to disclose the confidential information provided; also
        prohibits disclosure that the two parties are in negotiations

    •   
  • Return of confidential information - mandates the return or destruction of all
        provided documents once the prospective buyer exits the process

    •   
  • Non-solicitation/no hire - prevents prospective buyers from soliciting to hire (or
        hiring) target employees for a designated time period

    •   
  • Standstill agreement - for public targets, precludes prospective buyers from
        making unsolicited offers or purchases of the target's shares, or seeking to
        control/influence the target's management, board of directors, or policies

    •   
  • Restrictions on clubbing - prevents prospective buyers from collaborating with
        each other or with outside financial sponsors/equity providers without the prior
        consent of the target (in order to preserve a competitive environment)

Related Terms:

Definitive Agreement
The definitive agreement is a legally binding contract between a buyer and seller detailing the terms ...

Regulation FD
SEC regulation adopted in 2000 that eliminated the practice of selective disclosure. ...

Inside Information
Relevant information about a company that has not yet been made public. It is illegal for ...





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