Understanding The Basics: Non-Disclosure Agreements

One of the first steps in an M&A transaction is the signing of a non-disclosure agreement (NDA), also referred to as a confidentiality agreement. Although NDAs can be used in many different situations, in the M&A context these agreements are an essential prerequisite to the sharing of company information and the formal due diligence process.

An NDA can be either 'one-way' or 'mutual'. A one-way NDA is structured so that only one party will be disclosing information and the other party receiving it. In contrast, a mutual NDA contemplates that either party may disclose or receive information, and imposes mutual obligations of confidentiality.

There are a number of terms that should be included in an NDA, including the following essentials: