- The Contract Network  (TCN) an AI-powered contract collaboration platform, today announced the release of its transformative case study, "NDA Moneyball: The Results of M&A NDA Negotiations Don't Change." The case study, facilitated by The Contract Network's innovative use of generative AI to analyze over 20,000 anonymized M&A NDA negotiation points, challenges traditional views on negotiation power dynamics in middle-market M&A. The case study reveals that buyer "markups" of draft agreements are highly consistent, as are the final outcomes of the negotiations. The study concludes that utilizing market data at the outset of an NDA process could eliminate over 80% of NDA negotiation points, without compromising the substantive requirements of either party.

To conduct the study, TCN collaborated with industry leaders such as the US corporate practice of Eversheds Sutherland, one of the top 10 M&A law firms globally, and Integreon, a worldwide provider of tech-enabled legal, creative and business outsourced solutions, and other industry experts. The initial report focuses exclusively on middle market M&A NDA negotiations between sellers, including sell-side investment banks, and private equity funds, one of the most common forms of M&A negotiations.

To understand the underlying dynamics of the deal negotiations - what does each party require, prefer or simply permit - TCN analyzed anonymized collections of initial draft agreements, first-round buyer markups, and final outcomes from the negotiations. Contrary to popular belief that the power resides with the initial drafting party, TCN's findings reveal an unexpected uniformity in the final terms of these agreements, despite their varied beginnings. For example, for one issue in the data set - "buyer retention of confidential information for regulatory purposes" - only approximately half of all sellers proactively addressed the subject in their initial draft agreements. Despite this drafting omission, this carveout was uniformly added by prospective buyers, resulting in its presence in excess of 90% of all agreements.

This outcome, and many others, suggests that market norms are well established and more powerful than any one party's initial drafting effort. The study concludes that attempts to initiate NDA negotiations with terms diverging from these established norms are largely ineffectual and that a "move to market" by sellers will result in faster and more frictionless outcomes without sacrificing either party's required positions.

"We are excited to be able to share this study with the private markets community and to demonstrate our ability to deliver transformative value for every stakeholder in the deal-making process," said Jim Wagner, co-founder and chief executive officer of TCN. "Our findings are not just academically intriguing. They support actionable changes in negotiation processes and demonstrate our ability to greatly increase both the efficiency and predictability of M&A agreement negotiations across the board."

Much of the TCN study was made possible by close collaboration with members of the US M&A team of Eversheds Sutherland. "We are committed to furnishing our team and our clients the best information possible when negotiating their deals," commented Bob Pile, head of the US corporate practice and co-head of global corporate for Eversheds Sutherland. "Interacting with TCN and watching the AI synthesize a massive amount of data has been instructive and educational. But the real reward is how invaluable these insights can be to how we serve our clients going forward."

"In our world, sellers want to ensure their rights are protected in line with market standards. They also seek speed and certainty," said  Brock Matthias, Managing Director at VRA Partners, a boutique investment bank serving the middle market M&A community. "TCN has enabled us to both understand and enhance the dynamics of our deal negotiations in a manner that we believe will transform the efficiency of our interactions with the investor community, benefiting our sellers in the process."

The TCN study, available by request here, includes invaluable data about the most common M&A NDA clauses, the most frequently negotiated clauses, and, significantly, the clauses most often added by private equity buyers. The complete collection of market insights are available to TCN customers exclusively through their use of the TCN collaboration platform.

In January of 2024, TCN announced a strategic relationship with tech-enabled legal solutions leader, Integreon, to deliver M&A NDA negotiation on behalf of investment banks as a managed service on the TCN platform. "We are delighted to have played a pivotal role in this market study with TCN," said Gabriel Buigas, Executive Vice President for Contracts and Compliance Solutions at Integreon. "More significantly, we are pleased to be able to deliver these market insights and superior outcomes as part of our managed NDA solution offering on TCN."