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How Can a Non-Disclosure Agreement Protect My Business During an Acquisition or Business Merger?

 Posted on December 16, 2019 in DuPage County Business Law Attorney

non-disclosure, DuPage County mergers and acquisitions lawyersIf you are a business owner, you have probably poured a great deal of your time and money into growing your business. If you are considering a business merger or acquisition, it is essential that you take steps to protect your business. During a business transaction, confidential and proprietary information is often discussed. You may even share trade secrets or access to confidential software or computer files. In situations such as these, a non-disclosure agreement may be needed to ensure that the company given access to valuable information does not use it to your detriment.

Acquisitions and Mergers

The terms “merger” and “acquisition” are often misunderstood. Many people assume that these words mean the same thing, but there are important differences between these two processes. When one company purchases another company, this is referred to as an acquisition. The company that was purchased no longer exists.

A strategic remix acquisition involves the buyer purchasing a business and then integrating the operations and product line into its own business. A private equity acquisition involves the purchase of a company which is improved and then sold at a higher cost for profit. An alphabet acquisition is an agreement between the two companies that contains elements of a strategic remix acquisition and private equity acquisition.

When two companies join together to form one new company, this is called a merger. In 2017, Dow Chemical and DuPont merged into the company DowDuPont. This $130 billion merger was one of the largest mergers to occur in the last several decades.

A Non-Disclosure Agreement Can Protect Your Interests

In a business transaction such as a merger or acquisition, confidential information such manufacturing processes, formulas, designs, patent applications, business strategies, proprietary information, and vendor and customer lists may need to be shared with the other party. In order to ensure that this information is not used to the disclosing party’s disadvantage, many mergers and acquisitions involve non-disclosure agreements. Also called confidentiality agreements or NDAs, non-disclosure agreements identify what information is confidential and may not be shared with other third parties.

An NDA may also contain provisions requiring the recipient party to destroy or return confidential information at the request of the disclosing party. If the recipient party breaches a non-disclosure agreement, such as by using the confidential information to start a business very similar to the disclosing business, the disclosing business has the right to seek monetary damages.

Contact a DuPage County Business Law Attorney

For help with drafting a non-disclosure agreement, buying or selling an existing business, and more, contact Stock, Carlson & Asso. LLC. Call 630-665-2500 today to schedule a consultation with an experienced Wheaton business lawyer to discuss your needs.


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