The confidentiality agreement (or confidentiality agreement) (NDA) is the most defamed and shortest of the many contracts involved in the M&A process. Since an NDA must be negotiated and signed only to gain access to information that can lead to a quick decision not to waste more effort to pursue a given transaction, it is difficult for most private equity buyers and their holding companies to invest a significant amount of time in understanding the potential pitfalls that an NDA can represent, long after they have moved away from a potential transaction. In most cases, the approach is to limit negotiations to the most critical points (although there is not always a full appreciation or agreement on what they are) and to get the NDA signed as soon as possible. Once the NDA is signed and the available information that sparks real interest in pursuing a transaction, private equity buyers are much more inclined to invest the time and effort to negotiate each additional contract that is a necessary part of the M&A process. But with all due respect, the agreements reached in this unthined NDA, signed quickly to have access to information that allowed you to see that you were not at all interested in a transaction, remain as binding as the more thoughtful agreements negotiated as part of an effective buyout operation. And the risk of complaints adcoming when an NDA is executed with a “mediator” promising access to another party is particularly acute if the agreement is not reached through that intermediary. The Sixth Circuit upheld the Court`s ruling. While Henkel Parent Co. was clearly a “related enterprise” of a “party” of the NDA (i.e., “any individual, company or other business entity that directly or indirectly controls a party, is controlled by a party or is under common control with a party”) and was therefore entitled to obtain the confidential information as defined by the NDA, Henkel Parent Co. was not actually bound and responsible as a contracting party to violations of the NDA, only Henkel US was. In other words, only Henkel US was responsible for alleged violations of the NDA, whether the result of their own actions or of henkel Parent Co., its parent company. One of the many most fundamental agreements contained in a typical NDA is the agreement to keep “confidential information” and use it only for the purpose of evaluating the potential transaction.
However, to properly assess this information, the designated party to the NDA must be allowed to share this information with its funding sources, consultants and some of its “related companies”, whose entry or authorization is necessary to effectively monitor the proposed transaction. Permission to exchange this information with these representatives or other recipients is usually one of those “critical points” that are actually negotiated within the NDA. . . .