When a company is in the process of pursuing a transaction involving the acquisition or merger of another company, one of the first negotiable documents encountered will likely be a non-disclosure or confidentiality agreement ("NDA"). This is a document that will dictate how a company will handle confidential information during the due diligence process (and remain subject thereafter). Here are some key items of a non-disclosure agreement to look for as a potential buyer:

1. Definition of Confidential Information

Ensure the NDA clearly defines what constitutes confidential information. This should include any data, documents, or information that the seller deems proprietary. A broad definition might include everything from financial records and business plans to customer lists and technical data. Make sure that the definition also includes appropriate carveouts for what is not confidential information. Common exclusions include information that is already public, known to you prior to disclosure, independently developed, or disclosed by a third party without restriction. These protect you from being unfairly bound by non-proprietary information.

2. Obligations of Confidentiality

The NDA should specify your obligations regarding the handling of confidential information. Typically, this involves maintaining the secrecy of the information, not disclosing it to third parties, and only using it for the purpose of evaluating the acquisition. Ensure that these obligations are clear and feasible for you to comply with. Common exclusions for a buyer to recommend would be if disclosure is necessary or requested pursuant to law, rule, or regulation.

3. Who receives Confidential Information

Ensure the NDA allows for disclosure to certain parties, such as advisors, lawyers, accountants, investment bankers, and potential sources of debt or equity financing, who need access to the information for due diligence. These third parties should be bound by similar confidentiality obligations and specifically named in the NDA.

4. Term of the NDA

Check the duration for which the confidentiality obligations will remain in effect. This term can vary and is usually for a term of anywhere between one to four years. 

5. Return or Destruction of Information

Upon the termination of the NDA or completion of the acquisition process, the agreement should stipulate what should happen to the confidential information. Typically, you will be required to return or destroy any copies of the information. If you, as a buyer, cannot feasibly return or destroy all information received, ensure there is a carveout for retaining information due to your document retention policy or as required by law or regulation. 

6. Non-Solicit

Oftentimes, a Seller will include a provision in the NDA that the potential Buyer will not solicit for employment any of the employees, independent contractors, directors, or officers of the Seller, especially when the potential Buyer is in the same or similar industry as the Seller. In order to ensure inadvertent breach of this provision, a Buyer should ensure there is a carveout for (i) general, non-targeted employee searches, and (ii) employees who have terminated their employment with the Seller.  This is another key provision in an NDA that will oftentimes be the most negotiated provision in the NDA. 

7. Remedies for Breach

The NDA should outline the remedies available to the disclosing party in the event of a breach. This might include injunctive relief, monetary damages, or other equitable remedies. Because of the nature of proprietary information, it is extremely difficult to show actual monetary damages, especially in the short amount of time after learning of a breach and the need to forestall further inappropriate use of such information, and therefore, injunctive relief and specific performance are likely to be specific remedies included in an NDA.

Reviewing an NDA is a critical step in the acquisition process. While this is not an exhaustive list of the terms that will be in an NDA, these are some of the key provisions. Each NDA will have specific clauses that will need to be specifically negotiated and tailored to the acquisition. By paying attention to these key aspects, you can ensure that your interests are protected while enabling a smooth due diligence process.