Today, I'm sharing part 6 of my smb acquisitions intro series: a breakdown of the broker NDA.

Here's what you need to know when it comes to reviewing broker NDAs:

1) 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.

2) 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.

3) 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.

4) Common NDA terms:

  1. Definition of confidential info and who can receive it
  • Language protecting the broker's ability to collect a commission from the seller
  • Limitations on interviewing the seller or employees
  • Duration: avg 2 years
  • Disclaimers around info accuracy

5) Caution on red flags: while the terms mentioned above are common, there are permutations of these terms that can be problematic (for example, anything obligating the buyer to pay the broker's fee).If something seems strange, consult an attorney.