Smooth processes and confidentiality through NDA

The non-disclosure agreement (or NDA) is the starting point for any serious dispute between the seller and buyer sides within a sales project. However, NDAs regularly cause process disruptions and even deal cancellations right from the start because both sides cannot agree on the NDA. A certain market standard that balances the interests of the buyer, seller, and advisor has been established over the past few years. This guide highlights the do's and don'ts for a smooth start to the process.

Typically, sales consultants approach selected acquisition candidates using an anonymous short profile (or teaser) to generate interest in a potential transaction. If the buyer is interested in further investigating the investment opportunity, they must first sign a confidentiality agreement. This is important because, during the course of a sales process, the seller must disclose a great deal of confidential information that potential buyers, especially competitors, may only use for the purpose of making decisions regarding the transaction.

The NDA for small- and mid-cap transactions should be concise and succinct, avoiding clauses that are unacceptable to either party. A balanced NDA proposal that can be accepted by the buyer without negotiation saves all parties time and promotes momentum without creating negative sentiment.