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Non-disclosure of party's interest in the transaction. Many buyers do not want the seller to disclose to others their interest in purchasing the business in question. They would therefore want the NDA to keep confidential the buyer's identity and the fact that discussions are taking place with the seller.
What is a Non-Disclosure Agreement (NDA)? A Non-Disclosure Agreement (NDA) is a document that is exchanged between a prospective buyer and a seller in the initial stages of an M&A transaction. The document is exchanged after the prospective buyer shows interest in a company after looking at the teaser of the target.
disclosure agreement (NDA), also known as a confidentiality agreement, is a legally binding contract in which one party agrees to give a second party confidential information about its business or products and the second party agrees not to share this information with anyone else for a specified period of time.
The objective of an NDA in this case is to ensure that sensitive details remain within the boardroom. This can include information such as a pitch deck or financial information. Founders might also wish to avoid any conflicts of interest with the investor's existing portfolio companies in the same industry or sector.
The NDA can not only limit with whom the potential buyer can share information but also prevent a prospective buyer, who may be a competitor (either now or in the future), from using the target company's Confidential Information for any objective apart from what has been specified in the NDA.
Key Takeaways. An NDA acknowledges a confidential relationship between two or more parties and protects the information they share from disclosure to outsiders. The NDA is common before discussions between businesses about potential joint ventures.
How to write a non-disclosure agreement: What's included? Introduction. Definition of confidential information. How to handle confidential information. Exclusions from confidential information. Obligations of receiving party. Duration of agreement. Resolving disputes. Integration.
Confidentiality is crucial in the process of buying or selling a business. If leaked, information obtained through private discussions could derail the potential transaction and have a significant negative impact on the businesses' ongoing operations, value and prospects.