The Ins and Outs of NDAs

In mergers and acquisitions (M&A) transactions, sensitive information is part of the landscape. Confidential data, such as the fact that the business is for sale, financial statements, proprietary intel, and even trade secrets can be revealed. No matter your role in an M&A transaction, you want to keep your information safe. That’s where a nondisclosure agreement (NDA) comes in.

Sometimes called a confidentiality agreement, an NDA helps protect the players in an M&A transaction as well as in other areas in the business. But while the need for an NDA is fairly universal, there’s no standard form or timing. Here’s what you need to know.

Why

An NDA helps keep your business intact. This agreement can protect assets such as customer information, employee data, business strategies, formulas, processes, technologies and financial data. It will legally bind people to secrecy, whether or not you’re in the midst of a sale. An NDA keeps your proprietary information safe.

Who

You need separate NDAs for people in different roles. Get signed agreements from employees, suppliers, and prospective buyers. If someone could potentially speak out of turn or divulge information that could be detrimental to your business, they need an NDA.

What

NDAs vary, but these essential elements should be included:

• Naming of the people involved
• Definition of what is confidential
• Outline of how shared data can be used
• Obligation to return or destroy documentation when requested
• Terms of the agreement

Lots of other details can be included in an NDA, and that’s a good reason that there is no standard form. Your advisors can add information that applies specifically to your business and situation. This might include a listing of exclusions, details about technology usage, or access to employees. An NDA can be tailored to your situation.

When

The earlier an NDA is signed, the better. It might seem like overkill, but the sooner it’s signed, the sooner everyone understands the expectations, responsibilities, and limitations of their roles. Employees should sign an NDA when hired. When you’re entering into a potential sale, NDAs have a greater sense of urgency. Talk to your M&A advisor about getting agreements in place before your name is released and prior to the disclosure of financials, relationships and other information.

Protecting your business

NDAs are legal armor for your business. Make sure you’re defending all aspects of the business you’ve worked hard to build. If you have questions about NDAs, O’Keeffe & O’Malley can help. Call us at 913-648-1085 for a confidential meeting.