NDA Restrictions

searcher profile

February 17, 2022

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Hello all. I've been looking through broker business listings for a while, but have noticed the terms of a few NDAs are very restrictive. How conservative should I be when it comes to agreeing to these? For example, the text below --

"Buyer shall not contact any Seller, its banker, accountant, attorney, employees, suppliers, competitors, customers or others who might have information concerning Seller for any purpose whatsoever (including the hiring of Seller's employees) without specific prior written authorization by [broker]."

As I read this, I could unwittingly violate the agreement by buying a different business, putting an ad on a job site, and having one of this business's employees respond. Or I could hire the same attorney without knowing, or something similar. I imagine this sort of thing would be difficult for anyone to track, but at the same time I don't know how I should think about the legal risk here, particularly since I'm in the middle of a geographically-restricted search. Thanks for any insights.

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commentor profile
Reply by a searcher
from University of California, Berkeley in Seattle Metropolitan Area, WA, USA
Without an exhaustive list of all of those participants, I feel like they're basically suggesting you not talk to anyone about doing diligence on the deal. I can't imagine a restrictive NDA like that would pass legal tests, BUT I'm not a lawyer in the space and I typically consult legal rep when venturing down something that may put me in hot water. Having said that, I suppose it depends on what stage of exploration you're in and if you're looking directly at competitors in a region to determine how likely you are to engage with this company and move to their competitor based on that information. YMMV. Good luck!
commentor profile
Reply by a searcher
in Las Vegas, NV, USA
The 'only contact through the broker clause' is over reach and is likely a broker who has issues with control and is worried about their ability to actually close a deal.

A buyer and seller HAVE to be able to talk without a broker getting in the middle.

Just my opinion, I view brokers and realtors as one and the same, they bring nothing to the table but a website to advertise your business on and charge insane amounts of money for no real work.
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