Today's #smb thread is about NDAs: In most cases, you’ll have to sign an NDA to obtain any meaningful information. This is especially true for deals represented by brokers, who are responsible for safeguarding seller confidentiality.

Let's take a look:


Brokers each use different NDAs for their processes, and buyers need to sign them in order to receive the confidential information memorandum. This means that buyers could sign dozens, if not hundreds of NDAs over the course of a thorough search process.


Brokers frequently advise buyers to sign the NDA without redlines or pushback. Especially for high quality deals, they will usually have enough interest to only engage buyers that are willing to participate in their preferred process. While this can be frustrating to buyers, “just sign the NDA” tends to be the way to go for an interesting deal. However, buyers should still carefully read each NDA they receive. While most brokers use standard terms, there can be bad actors.

Disclaimer: Don’t take this as legal advice, we are just sharing our experience with searchers. You should always consult with a licensed attorney for legal matters.

Now, here are several common terms we’ve seen in broker NDAs:

  1. 1) Definition of Confidential Information: Typically, the NDA will cover confidential financial and non-financial information about the business, the identity of the business and business owner, and the fact that the business is for sale.

  2. 2) Description of who is allowed to receive Confidential Information: The NDA will limit the people who can get access to the information through the buyer and will bind additional recipients of the information (such as or members of the buyer’s deal team) to the same terms.

  3. 3) Protection for the broker’s commission: One of the brokers’ top priorities is often to protect their right to receive a commission from the sale of the business. While not present in other kinds of NDAs, buyers should expect to see language addressing this topic. Notably, these can be places where unfavorable terms are hidden. For example, be careful about non-circumvention clauses that obligate you to pay the broker’s commission (or other fees) broadly, not just if you overtly cut the broker out of the deal.

  4. 4) Disclaimer language around information provided about the business: buyers will receive a large amount of information about the seller and the business in question. To protect themselves from liability, brokers typically include disclaimer language in their NDA. This puts the onus on the buyer for due diligence of the business, not on the broker.

  5. 5) Duration: NDAs typically have a duration of 1-3 years, with an average of 2 years. As a general rule, the longer an NDA requires you to maintain its provisions, the more careful you need to be when it comes to evaluating your future plans.

Overall, make sure to be cautious when taking legal advice from anyone who is not a lawyer (including us – we’re just here to help smooth the acquisitions process). A good rule tends to be: if something seems strange, consult an attorney experienced with small business M&A.

#smallbusiness #mergersandacquisitions #nda #eta #search