This article titled ‘Veil of NDA on M&A Transaction’ by Mridul Sinha deals with Beneficiaries, Obligations, Confidentiality Of Information, Exceptions and Remedies related to M&A Transaction. Introduction A Non-Disclosure Agreement primarily referred to as the NDA or the confidentiality agreement is typically the very first agreement binding on the parties, which the parties to a Mergers and Acquisitions i.e. M&A transaction. The… Read More »

This article titled ‘Veil of NDA on M&A Transaction’ by Mridul Sinha deals with Beneficiaries, Obligations, Confidentiality Of Information, Exceptions and Remedies related to M&A Transaction.


A Non-Disclosure Agreement primarily referred to as the NDA or the confidentiality agreement is typically the very first agreement binding on the parties, which the parties to a Mergers and Acquisitions i.e. M&A transaction. The parties enter into the purpose of a Non Disclosure Agreement with the sole purpose and the responsibility of protection of the confidentiality or the secrecy of the information shared with the buyer or exchanged between the parties. A Non Disclosure Agreement may impose certain obligations on the buyer alone or mutual obligations may also be cast upon the parties to an M&A transaction. Non-Disclosure Agreements don’t have to be long and complicated. In fact, well-drafted ones usually don’t run more than a few pages long.

The important elements of Non-Disclosure Agreements include certain elements such as the identification of the parties, the definition of what is deemed to be confidential, the scope of the confidentiality obligation by the receiving party and the exclusions from confidential treatment. Apart from the following elements, some other elements that are important for a Non Disclosure Agreement are certain obligations to return or destroy confidential information when requested by the disclosing party and also, the term of the agreement


If we talk about the aspect of the beneficiaries, it is ostensible to consider the seller and the target company which has the prime purpose of deriving the maximum benefit out of a Non Disclosure Agreement. Since invariably, the vault in regards to the aspect of sharing the confidential information with a potential buyer for facilitating a Non-Disclosure Agreement transaction will be, however, open. In addition to this, it is highly volatile to accept the fact that the seller and the target company also stand exposed to adverse ramifications on their business, employees, customers and suppliers so the news of the potential M&A deal is leaked prematurely.

In certain cases where the target happens to be a listed entity, on top of these issues, there is a strong and an additional risk of posing a significantly adverse impact on the stock prices of the listed entity, should the news of the M&A transaction be leaked in an untimely fashion. If we consider the buyer’s side, we observe that from a buyer’s perspective, it is always desirable to have a mutual Non Disclosure Agreement for a number of reasons. Considering an example, we see that, during the course of a name in a transaction, it is possible that the buyer may have also to share its confidential information with the other party.

For instance, if the transaction is structured as a shared swap or should a seller insist upon confidential information of the buyer to satisfy the buyer’s ability to consume in the transaction and that it has the necessary financial way with all.


Two primary obligations imposed upon a recipient under an NDA non-disclosure person to whom the recipient shall be prohibited from disclosing the confidential information with anyone save and accept as permitted under the Non-Disclosure Agreement or unless otherwise consented to by the disclosure. Permitted recipients would include directors, executives, bankers, financers and advisors who need this information to evaluate the transaction and ordinarily, it’s the recipient who will be liable should any of these permitted recipients come to breach of the terms of the Non-Disclosure Agreement.

The second restriction being on use, the recipient is ordinarily permitted to use the confidential information solely for the purpose of evaluating the transaction. His obligations are typically time-bound, recognizing that this information has time value and is not relevant and confidential forever.

Confidentiality Of Information

The prime role of a Non-Disclosure Agreement is designed in a way for the protection of information which is intrinsically confidential or considered as a secret in nature and not every piece of information shared between the parties.

Specifically, meeting these characteristics and construing to the same is very important for an NDA to offer protection to the parties which are signing the same, specifically in this scenario of an M&A transaction. But the parties to the Non-Disclosure Agreement have the liberty of defining the confidential information. However, the tendency on the part of the disclosure is to really include anything and everything within the ambit of confidential information, save and accept information that is available in public domain.

However, there is a need of care to be given for appropriately defining the same in order to make the Non-Disclosure Agreement effective in the aspect of M&A transactions. In contrast, the recipient should be very that definition of confidential information is not too broad and that’s restrictive in nature.


If we consider the aspect of exceptions, in this case, there are several exceptions that are to be considered by the recipient for seeking the negotiations.

For instance, the restriction on the recipient to disclose or use the confidential information should not be applicable to confidential information which is directed to be shared pursuant in order of court or regulated origination authorities.

Also, it should be considered that such information is already available in public domain without any breach on the part of the recipient. Construing to the same, if such information is deemed to be received by the recipient from a third party who does not have a confidential obligation or has not reached its obligations to any other disclosure or if the recipient is already in possession of such confidential information without any pre-existing confidentiality obligation in relation to the disclosure.


It should be positively borne in mind that since the monetary damages may be difficult to quantify the same, damages solely may not be a sufficient remedy. In reality, most disclosures instead of claiming damages would rather want their confidential information to be kept secured and secret. the most preferred remedy for disclosure would be equitable relief in the nature of injunctive relief for specific performance to keep the secrecy of the confidential information shared in addition cumulatively the disclosure should also seek to negotiate indemnity in its favour for any loss suffered on account of the breach committed by the recipient.

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Updated On 28 Feb 2022 5:52 AM GMT
Mridul Sinha

Mridul Sinha

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