Non-Disclosure Agreements
A unilateral or mutual non-disclosure agreement regulates the scope of confidential information, permitted use, persons who may have access, advisors, financing providers, disclosure required by law, data security, return or destruction, the term of the agreement and the consequences of breach.
A non-disclosure agreement does not replace the condition for processing personal data, the mechanism for transfer abroad, or the information sharing permitted under competition law. Whether a clean team and aggregation are needed between competing parties is determined separately.
Process Letter, Offer and Bidding Procedure
In controlled sales, the timetable applicable to potential buyers, data room access, the Q&A arrangement, the management presentation, the content of the binding offer, financing confirmation, contract comments and the seller’s authority to change the process are set out in the process letter.
A legal assessment is made so that offers are compared not only on price but also in terms of conditionality, certainty of financing, permit risk, liability demands, time to closing and contract deviations.
Letter of Intent, Preliminary Protocol and Memorandum of Understanding
The main economic and legal terms of the transaction are framed under the headings of structure, approximate price or calculation method, review, exclusivity, confidentiality, costs, permits, timetable, validity and governing law.
It is necessary to separate clearly which provisions of the document are binding and which are an intention to negotiate. A “non-binding” heading does not by itself eliminate all consequences with respect to confidentiality, exclusivity, costs, dispute resolution or negotiation in bad faith.
Review of Personal Data, the Data Room and Cyber Risk
For what purposes and on what legal basis the target processes employee, customer, supplier and user data; and the notice, retention, security, suppliers, breaches, transfers abroad and data subject requests are reviewed. Whether combining databases after the transaction creates a new purpose or transfer is planned separately.
All personnel files, health data or the customer database should not be uploaded to the data room. Document sharing should be phased, limited to the purpose and proportionate; where necessary, anonymization, masking, sampling, access by external advisors only or a clean team method should be used.
Secure Data Room and Clean Team Management
The data room’s folder structure, access groups, document naming, versions, downloads, watermarks, time limits, Q&A, notification of new documents and closing copy rules are determined. Access is limited to persons who need it for the transaction; uncontrolled copying to personal devices is prevented.
If the parties are competitors, a clean team protocol is set up for competitively sensitive information such as customer-based prices, forward-looking plans, capacity, bids, costs or strategy. The target company continues to be managed independently until the permit and closing take place.
Frequently Asked Questions
Is a letter of intent binding?
Depending on the text of the document, some provisions may be binding and others may be only a framework for negotiation. Confidentiality, exclusivity, costs, governing law and dispute resolution are often drafted as binding. The express wording of each provision is looked at, not the heading.
Should a data room be opened before a non-disclosure agreement is signed?
Before sensitive information is shared, confidentiality, the purpose of use, the persons who may have access and the conditions for return or destruction should as a rule be regulated. However, a non-disclosure agreement does not replace obligations under personal data and competition law.
What is a virtual data room?
A virtual data room is a secure online space in which transaction documents are provided with access, logging, version and sharing controls. It should not be treated as the same as an ordinary file-sharing folder; role-based access, multi-factor authentication, watermarking and logging features should be sought.
Can employee and customer data be uploaded to the data room?
Only information that is necessary for the purpose of the transaction, has a legal basis and is proportionate may be shared. Identity, health, salary or customer details should, where needed, be aggregated, masked or have restricted access. An unlimited database transfer should not be made before closing.
Why is a clean team used?
It is used, especially in transactions between competing undertakings, to prevent competitively sensitive information from reaching the parties’ day-to-day commercial teams. Authorized external advisors or limited persons review the data and provide the parties with aggregated or masked output.