NDAs for investors/advisors?

November 20, 2018

by a searcher from University of British Columbia in Vancouver, BC, Canada

Is it necessary / recommended for your investors and advisors to sign an NDA before you can share confidential info with them? It seems many NDAs from brokers technically allow this, but still hold you responsible for any breaches - which makes it a bit of a grey area.

Would be interested to hear how searchers have handled this - for both informal disclosures (e.g. phone calls, emails) and formal ones (e.g. Confidential Financing Memorandums).

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Reply by an intermediary
from State University of New York at Stony Brook in Boynton Beach, FL, USA

Hi Jeremy, I am an M&A intermediary and have an additional perspective on this issue. After a potential buyer signs a broker/intermediary NDA, it is true that most NDAs permit the distribution of the confidential information by potential buyers to their advisors and investors. However, the NDA holds the potential buyer responsible should there be a leak of information. Yes, you can redact identifying information, but that is cumbersome and not always effective. There are two other alternatives that I can recommend: 1) you can request your advisors/investors sign additional copies of the NDA or 2) create a blanket agreement with your advisors/investors to deal with the situation. I like the latter, especially if your advisors/investors are a fixed group of people. Ask each of them to agree to your form of confidentiality agreement that says that you will be presenting them with confidential information about various prospective deals and that they agree to keep that information confidential. If you choose this latter approach, I suggest you have an attorney draft such an agreement for you. Since confidentiality agreement forms are ubiquitous, it should not be too expensive to get an attorney to customize one for your needs. I hope this helps.

Reply by an member
in Los Mochis, Sinaloa, Mexiko

I agree with Greg's comment, that it should not be a problem for anybody to sign NDA. It is possible to do "universal NDA". You can specify the relationship between you and your investors in the NDA and that due to this relationship the investor will be presented with investment opportunities/confidential information. It is not necessary to sign a NDA for each case. This is as we do it, but better to check with your lawyer. ;-)

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