NDA (Non-Disclosure Agreement)

A non-disclosure agreement (NDA), also called a confidentiality agreement, is a legally binding contract in which a prospective buyer agrees to keep confidential all information received about a business during the sale process. NDAs are signed before the seller discloses sensitive business information to any potential buyer.

A well-drafted NDA for a business sale includes: definition of confidential information (financial records, customer lists, employee details, operational processes), restrictions on who the buyer may share information with and for what purpose, the return or destruction of materials if the deal does not proceed, non-solicitation provisions preventing the buyer from hiring key employees or approaching customers, and the term of the confidentiality obligation.

Business brokers typically provide standard NDA forms that prospective buyers sign before receiving a confidential information memorandum (CIM). In mid-market transactions, buyers typically negotiate the NDA terms before signing.

See also: Due Diligence, Letter of Intent, Confidentiality, Data Room.