M&A Defensive Tactics: Using A Confidentiality Agreement To Stop A Hostile Takeover Bid

On January 19, 2009, the Ontario Superior Court of Justice permanently prohibited Research In Motion's hostile bid to buy Certicom, on the basis of RIM's breaches of non-disclosure agreements. The Court found that the confidentiality provisions of their non-disclosure agreements had the effect of a standstill provision and independently prevented the bidder from making its hostile bid. The ruling led RIM to withdraw its bid. Another suitor, VeriSign, has now entered into an agreement to buy Certicom on a friendly basis.

The Court's ruling highlights the significance of the specific wording of a confidentiality agreement and demonstrates the importance of purchasers considering their future plans when negotiating the terms of a confidentiality agreement and using confidential information provided by a target.