M&A NDAs contain several specialized provisions not typically found in standard business NDAs:
- Standstill clauses: Prevent the buyer from making hostile moves or acquiring shares without permission
- Non-solicitation of employees: Protect the seller's workforce during and after due diligence
- Data room access controls: Specific protocols for accessing sensitive transaction documents
- Exclusivity provisions: May restrict either party from negotiating with others
- Residuals clauses: Address what happens to knowledge retained by the buyer's team
M&A NDAs are also typically more heavily negotiated, involve higher stakes, and have shorter but more intensive compliance periods aligned with deal timelines.
The seller or their investment banker typically provides the first draft of the NDA. This is because:
- The seller is disclosing more sensitive information and has greater need for protection
- Investment bankers running sale processes have standardized forms designed to protect sellers
- Sellers want to control the baseline terms from which negotiations begin
However, sophisticated buyers often counter with their own form or heavily redline the seller's draft. Strategic buyers who regularly pursue acquisitions typically have their own preferred NDA templates. The party with more leverage in the specific transaction usually gets their form accepted, with negotiated modifications.
A standstill clause prevents the potential buyer from taking certain aggressive actions for a specified period, typically 12-24 months. Restricted actions usually include:
- Acquiring shares of the target company in the open market
- Making unsolicited acquisition proposals or public announcements
- Soliciting proxies or seeking board representation
- Joining with other parties to pursue an acquisition
- Encouraging third parties to take any of the above actions
For sellers, standstill clauses are critical protection against having disclosed confidential information used to facilitate an unwanted or hostile takeover. For buyers, overly broad standstills can restrict legitimate strategic options, which is why buyers often negotiate for "fall-away" provisions that terminate the standstill if the seller shops the deal to others.
M&A NDA terms vary based on the type of information and the specific provision:
- General confidentiality: 2-3 years is market standard for most business information
- Trade secrets: Often protected indefinitely or "for as long as such information remains a trade secret under applicable law"
- Standstill provisions: Typically 12-24 months from signing
- Non-solicitation of employees: Usually 12-18 months
The appropriate term should reflect how long the disclosed information retains competitive value. Financial projections may become stale within a year, while customer relationships and proprietary technology may warrant longer protection.
Upon deal closing, the NDA is typically superseded by the definitive purchase agreement. Most M&A NDAs include explicit language stating that the NDA terminates upon consummation of the transaction.
The purchase agreement will contain its own confidentiality provisions covering:
- Post-closing confidentiality obligations of both parties
- Protection of acquired business information
- Non-compete and non-solicitation covenants for sellers
- Transition services confidentiality
Certain NDA obligations may survive closing or be explicitly incorporated into the purchase agreement, particularly if they relate to pre-signing disclosure or conduct.
A residuals clause permits the receiving party to use general knowledge, ideas, concepts, and skills retained in the unaided memory of its personnel, even if those were developed or refined through exposure to the disclosing party's confidential information.
For buyers: Residuals clauses are highly valuable because they prevent claims that normal business activities somehow breach the NDA. Without one, a buyer's team might be accused of misusing confidential information simply because they learned about industry approaches during diligence.
For sellers: Residuals clauses create risk that truly proprietary information could be exploited. Sellers should consider:
- Limiting residuals to general industry knowledge
- Excluding specific categories (customer data, pricing, technical specifications)
- Requiring "clean team" arrangements for most sensitive information
- Defining what constitutes "unaided memory"
This depends entirely on the NDA's "permitted disclosures" section. Standard M&A NDAs allow disclosure to:
- Legal and financial advisors: Almost always permitted, subject to confidentiality obligations
- Potential financing sources: Usually permitted, but sellers may require notice or limit the number
- Potential co-investors or consortium members: Often requires seller consent or at minimum advance notice
If you anticipate needing to share information with financing sources or co-investors, ensure this is explicitly addressed in the NDA before signing. Some sellers will require that each recipient sign a separate confidentiality undertaking or "joinder" to the main NDA.
A fall-away provision terminates or relaxes standstill restrictions upon the occurrence of certain triggering events. Common triggers include:
- Seller entering into negotiations or a definitive agreement with a third party
- Seller publicly announcing willingness to consider acquisition proposals
- A third party making a public acquisition proposal
- Seller's board recommending a third-party offer
Buyers want fall-away provisions because they prevent the seller from using the standstill to shop the deal while keeping the original buyer locked out. Without a fall-away, a buyer could be prohibited from making a competitive bid even after the seller has essentially put the company in play.
Sellers may resist broad fall-away provisions because they want to control the process and timing of any competitive bidding.
A "don't ask, don't waive" (DADW) provision prohibits the buyer from even requesting that the seller waive the standstill. Combined with a standard standstill, this creates a complete bar on unsolicited proposals.
DADW provisions became controversial after cases where sellers' boards arguably used them to entrench themselves against potentially beneficial offers. Delaware courts have scrutinized these provisions, particularly when they extend beyond the initial due diligence period.
For buyers: DADW provisions are highly unfavorable and should generally be rejected or limited. At minimum, negotiate for the ability to make private, confidential requests to waive.
For sellers: While DADW provisions provide maximum protection, they may create fiduciary duty issues if they prevent the board from considering beneficial transactions. Many sellers now accept confidential waiver requests while prohibiting public proposals.
Most M&A NDAs require the receiving party to return or destroy confidential information upon request or when negotiations terminate. Key considerations include:
- Carve-outs for legal retention: Ensure you can retain copies as required by law, regulation, or internal compliance policies
- Automated backup systems: Information stored on routine backup systems is often excluded from destruction requirements
- Professional advisors' copies: Legal and accounting advisors typically retain copies per their own document retention policies
- Certification requirements: Sellers may require written certification of destruction, which should specify the scope and any exceptions
Buyers should ensure return/destruction obligations are practically achievable and include reasonable exceptions for standard business practices.
Both structures are common, depending on the transaction type:
One-way (seller to buyer): Most common in traditional M&A where the buyer is primarily receiving information about the target. The seller's confidentiality is protected; the buyer has no disclosure obligations.
Mutual NDA: Appropriate when:
- Both parties are disclosing sensitive information (strategic partnerships, joint ventures)
- The buyer's financing structure or strategic plans are confidential
- Stock-for-stock transactions where both companies share material information
- The buyer insists on balanced terms as a negotiating position
Even in mutual NDAs, certain provisions (like standstill) typically only run one way since only the buyer would be in a position to take hostile action against the seller.
Non-solicitation provisions restrict the buyer from recruiting or hiring the seller's employees during and after due diligence. Typical variations include:
- Scope: May cover all employees, only employees the buyer met during diligence, or a specific list of key employees
- Duration: Usually 12-18 months from signing or termination of discussions
- Exceptions: Often excludes employees who respond to general advertisements or are terminated by the seller
Buyer negotiation points: Limit to named individuals or those directly involved in presentations; exclude general advertising responses; shorten duration; carve out employees who approach the buyer.
Seller protection: During diligence, buyers meet and evaluate key personnel who are critical to the business. Without non-solicitation, a failed deal could result in losing top talent to the buyer.
M&A NDAs typically provide for both equitable and legal remedies:
- Injunctive relief: Courts can order the breaching party to stop using or disclosing confidential information. M&A NDAs usually include acknowledgment that money damages are inadequate
- Specific performance: Courts can order compliance with specific NDA obligations
- Money damages: Compensatory damages for actual harm caused by the breach
- Attorney's fees: Many M&A NDAs require the breaching party to pay the other's legal costs
Proving damages for confidentiality breaches can be difficult, which is why the injunctive relief provisions are so important. The NDA should explicitly state that breach would cause irreparable harm for which money damages are inadequate.
See our Breach Response Guide for detailed steps if you suspect an NDA violation.
NDA negotiation timelines vary significantly based on deal context:
- Competitive auction: 2-5 days typical; sellers want to move quickly and may not negotiate heavily
- Negotiated sale: 1-2 weeks common for back-and-forth on key terms
- Strategic/complex deals: 2-3 weeks if issues are contentious or multiple parties involved
Factors that extend negotiations:
- Public company involvement (additional securities law considerations)
- Cross-border transactions (multiple legal regimes)
- Regulatory sensitivities (antitrust, national security)
- Prior relationship issues between the parties
Experienced parties can often agree on terms within 48-72 hours if using market-standard forms and neither side takes extreme positions.
Yes, most M&A NDAs include provisions protecting the existence and nature of the discussions themselves. This is particularly important because:
- Market sensitivity: News of potential sale can affect stock prices, employee morale, and customer relationships
- Competitive dynamics: Competitors may use knowledge of discussions to their advantage
- Deal protection: Premature disclosure can attract unwanted bidders or trigger change-of-control provisions
Standard provisions prohibit disclosure of:
- The fact that discussions are occurring
- The identities of the parties involved
- The terms being discussed
- The status of negotiations
Exceptions typically allow disclosure if legally required (securities filings, court orders) or if the other party consents.