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Confidentiality Agreement

The Confidentiality Agreement for Real Estate Investments and Corporate Sales!

The Confidentiality Agreement

For each real estate investment and buyout, the seller side will insist on entering into a confidentiality agreement. This is partly due to the fact that affected parties such as employees, customers, suppliers and competitors should not be informed about the intention to sell, and partly because the transaction involves the exchange and disclosure of very confidential and sensitive corporate data. The conclusion of a confidentiality agreement creates the legal framework for confidential discussions and for the necessary exchange of information. This paper discusses the key content and frequent discussion points of a confidentiality agreement for a corporate sale.

Parties to the Confidentiality Agreement

As a rule, it is the consultant who prepares and concludes the confidentiality agreement as part of the initial contact with the potential buyer. If the seller were to take this process into their own hands, the name and intention to sell would have been disclosed even before the conclusion of the confidentiality agreement, ie exactly the points that should be protected by the agreement. Most of the time, a comprehensive regulation will be introduced to ensure that the confidentiality agreement does not only apply to the buyer, but also includes affiliated companies.

Definition of confidential information

Each seller will want to classify not only the submitted written and verbal information as confidential, but also the intention to sell and the discussions about a possible transaction. On the other hand, the buyer will press for exempted information that is freely available and that is already known prior to the conclusion of the confidentiality agreement.

Intended purpose of the confidential information

The seller will agree that the information provided may only be used for the evaluation and review of a possible transaction. Often, only the use and communication within the buyer organization or its affiliates is allowed, and usually only at the level of the executive or audit staff. Frequently, however, the disclosure to consultants who are obliged to secrecy, allowed. The buyer must ensure that all his employees or consultants involved in the sales process comply with the confidentiality agreement. In most cases it is also excluded that the buyer uses the confidential information for competition purposes.

Handling the confidential information if the discussions are unsuccessful

The seller will insist that any information provided will either be returned or destroyed following a call failure. Usually the prospective buyer is required to prove this. This poses a big problem for many buyers, especially with regard to automated back-ups and data archiving. That is why discussion about extermination and complete annihilation sometimes comes up. In addition, the prospective buyer will confirm that he has no right to the confidential information.

Contacting rules and non-solicitation

The seller will require the prospective buyer to contact only those employees named for this purpose or the adviser involved for any transaction related issues. In addition, the seller will often impose a non-solicitation on the prospective buyer, d. h., the prospective buyer must refrain from anything that could lead to a departure of employees of the company for sale. The buyer will then often want to apply for a derogation for general unsolicited applications. Because larger corporations in some cases have hundreds of job advertisements and fear that they could violate the confidentiality agreement unconsciously.

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