Exchange of Information in M&A Transactions - Competition issues


Exchange of business-related information is an essential part of any M&A transaction, starting from pre-acquisition discussions, up to the due diligence procedure. Sensitive business information allows a potential purchaser or merger party to assess the true value of a business and evaluate whether the target business is in fact a good fit with its own. However, for both vendors and purchasers, or parties to merger discussions, there are sound commercial reasons to exercise caution in revealing confidential business information, particularly where the purchaser is an actual or potential competitor.

The risk of engaging in illegal cartel activities or starting fictitious negotiations as a cover to exchange sensitive information are serious concerns of competition authorities.

Strict enforcement of competition rules in relation to pre-acquisition disclosure should aim not only to protect the vendor, in case the deal shall not eventually be concluded, but also the potential purchaser, who should avoid any suspicions regarding the legitimacy of its actions during the entire procedure.

Although there are no comprehensive lists detailing which business information may or may not be disclosed during a M&A deal, both the EU and national legislation sets forth guidelines to be observed by the involved undertakings when managing pre-closing information exchanges.

While every transaction is different, involving specific features of the relevant industry or market, the principles described in the newsletter are generally applicable and may constitute grounds for structuring a sound pre-acquisition/pre-merger process.