Mergers and acquisitions present exciting opportunities but also pose significant risks, particularly regarding sensitive information. If you are thinking about buying or selling a business, protecting trade secrets should be at the top of your list. Trade secrets often hold the real value of a company, so keeping them secure matters.
Understand what counts as a trade secret
Before anything else, you need a clear idea of what qualifies as a trade secret. In Texas, the Texas Uniform Trade Secrets Act (TUTSA) defines a trade secret as information that has independent economic value and is reasonably protected. This could include customer lists, formulas, pricing strategies, or manufacturing processes. Identifying these assets early helps you decide what protection steps to take during M&A discussions.
Use strong confidentiality agreements
When you share trade secrets during the deal process, you must lock down confidentiality agreements. Ensure that both parties sign non-disclosure agreements (NDAs) before any sensitive information is exchanged. A good NDA clearly outlines what information is protected, limits its use, and specifies penalties for misuse. In Texas, courts enforce well-drafted NDAs under TUTSA, so they offer real protection when done right.
Limit who gets access to information
You should not share trade secrets with just anyone involved in the M&A process. Restrict access to a small group of trusted individuals. Use “clean teams,” composed of individuals who review sensitive materials without disclosing information to decision-makers until the deal finalizes. This way, you keep secrets safe even if the deal falls apart. Texas courts recognize efforts like these as reasonable steps to maintain secrecy under the law.
Keep protecting trade secrets after closing
Your work does not stop once the deal closes. Include clauses in the purchase agreement that protect trade secrets after the sale. Spell out the buyer’s duties to continue safeguarding information. If employees are part of the deal, make sure they sign agreements that require ongoing confidentiality.