Non-Disclosure Agreement (NDA)

A legal agreement protecting confidential business information shared during M&A discussions, required before accessing detailed company data.

A Non-Disclosure Agreement (NDA) is a legal contract that protects confidential information shared between parties during business discussions.

Standard NDA Terms

What's Protected:

  • Financial information
  • Customer lists
  • Trade secrets
  • Business strategies
  • Employee data

Duration:

  • Typically 2-3 years
  • Some provisions indefinite

NDA Types in M&A

One-Way NDA:

  • Seller shares information
  • Buyer agrees to protect it
  • Most common in acquisitions

Mutual NDA:

  • Both parties share information
  • Both agree to protection
  • Used when buyer reveals strategy

Key NDA Provisions

ProvisionPurpose
Definition of confidentialWhat's protected
Permitted disclosuresAdvisors, lenders
Non-solicitationProtects employees
StandstillLimits hostile actions
Return/destructionWhat happens when talks end

NDA Red Flags

For Buyers:

  • Overly broad definitions
  • Unreasonable time periods
  • Excessive penalties
  • No carve-outs for public info

For Sellers:

  • No non-solicitation of employees
  • Missing standstill provision
  • Weak enforcement provisions

Related Terms

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