One of the most important documents you will need to create as part of your M&A exit process is the non-disclosure agreement (NDA) that you will need to have potential buyers sign.
Why does this matter?
First, and most importantly, before you release any confidential information about your company, you will need to have every buyer sign your NDA. If you release any data about your company without having a legally binding NDA, you risk a serious breach of confidentiality about your business that could end up harming it in the long run.
If you have not hired an investment banking firm with experience, like Generational Equity, you will need to create your own NDA. This should never be done without the input of an experienced M&A attorney. It is far too risky to release information to any buyers if you don’t have, at a minimum, an iron-clad NDA signed and in place.
Keep in mind that you will also be creating a limited auction environment, so you will most likely have multiple NDAs out at once, and you will need to keep track of each one to ensure that the information you are releasing is trackable and traceable.
One of the most important components of any NDA is the stipulation that the buyer does not breach the confidentiality of the seller’s business. This can include several issues including:
As you can see, the definition of what is included in an NDA can and should be very specific to your business. Clearly those items that make your business unique, the intangible assets that make you successful, are very distinct to you and your company and need to be protected from those buyers who may not really be interested in your company, but are more interested in “stealing” trade secrets from you under the guise of being a real buyer.
So to avoid all the risks this can carry for you, we highly recommend that you hire an experienced investment banking advisor to guide you through the entire exit process, but especially the NDA phase. Don’t just take my word for it – have a listen to what a few of our clients have to say about the need for diligence in providing any data to anyone:
As these business owners indicate, during the due diligence process, where your NDA really becomes important, it is critical to have a professional by your side to help you navigate the key steps involved in closing an optimal deal with any buyer.
Since most business owners will only sell one company in their entire career, it is not wise to leave your financial legacy up to rookies, those with less experience than you would like, when negotiating with professional buyers.
To learn more about how critical an NDA can be, and to gain a greater understanding of the entire exit process, I would recommend that you attend a Generational Growth and Exit Planning Conference. Even if you have gone before, getting a refresher on the key elements of successful exit planning can be critical. To find out how you can attend, please call us at 972-232-1121 or visit our website, provide us with your contact information, and we will be in touch.
But the bottom line is this: Do not approach any buyers without having an NDA signed and in place that can protect you from loss. Using anything less than that can have serious consequences for you and your business.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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