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March 28, 202106477000

Non-Disclosure and Other Preliminary Agreements in Business Transactions

A Confidentiality Agreement (also sometimes referred to as an Non-Disclosure Agreement) is typically the first stage for the due diligence process in a transaction. These agreements can effectively act as a standstill agreement and can take many different approaches including disclaiming reliance or being non-binding. Letters of Intent are an intermediate step between NDAs and definitive binding agreements. The Texas Supreme Court’s opinion in Energy Transfer Partners, L.P. v. Enterprise Products Partners, L.P. makes clear that Texas embraces the principles of freedom of contract among sophisticated businesses, and that they can trust that their legal documents will be enforced as written. This means that in Texas companies can rely on conditions precedent to avoid an unintended partnership or joint venture, and those conditions precedent can be set forth in a confidentiality agreement, letter of intent or other preliminary agreement. This article includes a seller oriented confidentiality agreement and letter of intent.

Post-Closing Covenants in M&A Transactions

Following the acquisition of all or a significant part of the business and properties or equity interests of a target company, whether by merger, consolidation, purchase of stock or other equity or otherwise (an “M&A transaction”), the parties often make contractual promises to each other to take, or to not take, certain actions after the closing of such transaction. These promises, commonly known as post-closing covenants, are typically contained in a definitive agreement between the seller and the buyer with respect to the M&A transaction (an “M&A agreement”). Such post-closing covenants may relate to transitioning the acquired business from the seller to the buyer, continuing arrangements between the parties or allocating responsibilities among the parties, among other things. They play an important role in completing the M&A transaction and carrying out the intent of the parties.