Why do I need to sign a Non Disclosure Agreement (NDA)?

A Non Disclosure Agreement (NDA) is a document which protects both parties, the seller and the buyer in the exchange and flow of sensitive and confidential information about the business for sale. If this information were to be released into the open market, it could be massively damaging to the business concerned.

The signing of an NDA ahead of the release of further information, which normally starts with the Information Memorandum, is a standard practice within the sector for buying and selling companies. Once signed, it binds both parties to treat any information exchanged between them as confidential. All information exchanged will be covered by the NDA. This includes, amongst other things:

• Directors / shareholders and ownership status
• financial statements;
• management accounts and projections;
• customer and supplier information;
• staff and HR matters;
• operational aspects;
• any patents/trademarks or intellectual property;
• any uniqueness or niche aspect
• customer contract information

However, the above information can be shared with relevant parties to the transaction such as funders, fellow investors, your accountant/corporate financier, etc to the extent that they, by definition, are also bound by the NDA’s terms upon the buyer signing the document.

A seller’s adviser will not allow you to progress any further than reviewing teaser document information until you’ve signed the NDA. Even then, the seller may veto the release of further information to you until they have gained further clarification about you as a serious potential buyer. Additional information required by the seller might include a copy of your CV; a Linkedin profile; physical proof or assurances from you or your adviser that you have the personal capital to complete a transaction of the size envisaged, etc.

Some sell side advisers have a single NDA which, once signed, covers you for receipt of any of their Information Memorandum, normally for 12 months from initial signature. Other advisers might request an NDA to be signed on a company by company basis.

Valius has one standard NDA which the buyer signs before progressing through to the “Contact the Seller” stage. This covers any initial teaser/generic information exchanged with the buyer through the portal. However, Valius cannot guarantee that the seller’s advisers will not also ask you to sign a copy of their own NDA subsequently in order to progress further. This is quite normal in the business acquisition process.