How ILPA’s Model NDA Could Change Preliminary Due Diligence Practices

LPs are typically required to execute non-disclosure agreements (NDAs) before obtaining information to perform due diligence of fund managers. Although the obligation to keep information confidential is relatively straightforward, each manager has a different NDA for LPs to review. That forces LPs either to accept each NDA without considering its terms or to negotiate each one separately. If LPs choose to negotiate, then they will incur costs and delay access to manager information without any certainty about whether they will even invest with that manager. Unfortunately, GPs face many of the same cost and time considerations as well. To remedy those fundraising impediments and streamline the NDA process, the Institutional Limited Partners Association (ILPA) recently released a new model NDA (Model NDA). The Model NDA’s terms are largely uncontroversial, and there is clearly an appetite for such a document – it was downloaded 400 times on its first day of release. To better understand ILPA’s objectives and the Model NDA itself, the Private Equity Law Report interviewed representatives from ILPA, LP counsel and GP counsel. This article analyzes the rationale for the Model NDA, its key features, its interplay with click-through confidentiality agreements and its potential impact on the PE industry. See our two-part series on ILPA’s model limited partnership agreement: “Analysis and Market Response to ILPA’s Deal-by-Deal Waterfall Model LPA” (Sep. 15, 2020); and “Clarifying Updates to Non-Economic Provisions in ILPA’s Model LPA” (Sep. 22, 2020).

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