Non-Disclosure Agreements in the Sale of Small Businesses

Business Brokers — Quit Using Non-Disclosure Agreements at the Outset of Marketing

“Now, I don’t want to go on a rant here…” — Dennis Miller

I previously shared an advisory engagement CCM is working on, the succession or acquisition of a small business meeting a set of parameters (https://www.clarendoncapitalmanagement.com/successionsearch). This opportunity has allowed me to learn more about the small business community, including referral partners, search funds/partnerships, and business brokers. Identifying a small business that meets numerous parameters requires a lot of outreach, networking, and turning over many stones.

This experience has reinforced my strong opinions on non-disclosure agreements (NDAs). NDAs are also known as Confidentiality Agreements or Confis.

It is premature to require an NDA to be in place at the outset of sharing information, particularly in smaller size transactions. There is a high probability that it goes no further than a ten-minute review to make a preliminary decision if the opportunity warrants digging in deeper. Requiring an NDA at the outset will require me and other prospective acquirors to spend considerable time marking up an NDA or being forced to agree to terms that are…