The NDA is a legal document that is considered a standard in the business transaction world.  Its main function is to insure the confidentiality of a seller’s business information if a deal with a potential buyer falls through.  This contract gives both sides of a business transaction the freedom to be honest and therefore is essential for full disclosure of the business information during the process of a sale.

Within the NDA there are important rules for a potential buyer to follow.  Buyers may not discuss the business sale with anyone who is not a party to the NDA. They may not talk to employees or customers, nor can they “steal” staff or clients from the business. They cannot use the information they discover about the business for a commercial advantage.  This allows for the protection of the confidentiality of the business transaction until it is complete.

For a seller, the benefits of a NDA are twofold.  First, a NDA separates financially capable buyers from all potential buyers.  This keeps a seller from wasting their time with unqualified buyers.  Second, it protects the seller’s business, especially in the event that a potential sale falls through after the disclosure of sensitive business information to a prospective buyer.  This keeps the proprietary information of the business out of the hands of competitors, and also entitles the seller to claims and damages if the business is adversely affected by a breach of confidentiality.

As a buyer, the NDA also has benefits.  Within the shield of confidentiality that this agreement allows, a potential buyer will be able to really asses the business based on financial records, contracts, and business plans.  Without this accessibility, a buyer might purchase a business that seems fine by all outward appearances, but in reality has major issues that can only be discovered by a good look at the books.

Are you a buyer or seller who has questions about the use of NDA’s and how they can benefit you? Please feel free to leave us a comment or question here and we will be happy to address your concerns.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com