South West deal activity shows significant uptake on Management Buyout and Management Buy In’s this year, corporate partner Gavin Poole reviews half year M&A report.
Experian’s recent report on M&A activity in the UK and Republic of Ireland for the first half of 2018 “represents a robust return given the current climate”. From a national perspective, large value transactions have been concluded in the media, pharma, telecoms, manufacturing and retail sectors. The experience at Stephens Scown bears witness to this – the earlier reported TRAC/Pharmalex acquisition (https://www.stephens-scown.co.uk/corporate-commercial/trac-global-growth-trac-joins-pharmalex-group/) and the Delivery Group MBO (https://www.stephens-scown.co.uk/employment/the-delivery-group-acquired-by-management/) are recent examples.
Experian commentary on south west deal activity shows a significant uptick on Management Buyout’s and MBIs so far this year. As with any large deal, negotiations should be built on the bridge of confidence amongst all parties so that information can be shared openly and without further dissemination or abuse.
Of course, the simplest means of retaining confidentiality is not to share information in the first place. However, where this is not possible, confidentiality (or non-disclosure) agreements help to build that bridge. In recent times and in different contexts (American presidents, footballers and other celebrities), NDAs have had bad press, acting more as a gagging tool. In the context of M&A work, they are essential to the negotiations as NDAs can:
- give confidence to both parties. NDAs and their contents can be an early step for parties to build a legal commitment to each other
- enable the parties to proceed with their negotiations in a transparent manner
- set out what is/is not confidential. This will be important; too wide a definition of “confidential information” may render the protection unenforceable; too narrow may allow valuable information to slip through
- describe agreed levels of secrecy within the receiving organisation – it will be unlikely that all the employees of the receiving organisation should be able to see the disclosed information
- identify who else needs to be involved in the negotiations (including professionals) in order to assess the information;
- the manner in which the information is to be shared: electronic disclosure, passwords, access, times of upload and so on
- the use to which the information is put – usually only for the “permitted purpose”. This is particularly relevant where competitors are in negotiation with each other. The manner in which the information can be copied and disseminated can also be prescribed
- where relevant, include restrictive covenants (pertinent in a competitor situation)
- include remedies for breach
- set out what happens to that information when negotiations end.
There is more than one approach to NDAs; the context of the negotiations, the quality and sensitivity of the information and the circumstances of the transaction contemplated by the parties should mean that there is no “one size fits all” NDA.
For those managers considering a buyout, see further our guide here.
Gavin Poole is a partner in the corporate team at Stephens Scown. If you would like to talk Management Buyout or any other corporate law matter then please do contact Gavin on 01872 265100, or by email firstname.lastname@example.org. We have produced a guide to MBO’s which can be accessed here