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Why do I need a NDA when selling my business?

The nature of selling a business means you must divulge various pieces of financial information that, in normal circumstances, would remain confidential from your competitors and the public.

There is no way of helping this information to remain confidential, other than by using a legally-drafted non-disclosure agreement, or NDA. This is intended to prevent disclosure of sensitive information using the threat of legal action against any party who contravenes the agreement, and breaches your confidentiality.

The threat of having your ideas or trade secrets stolen, or your commercial data used to gain a competitive advantage, is considerable and far-reaching. An NDA essentially makes the recipient legally-obliged to meet its terms and conditions.

What exactly is a non-disclosure agreement?

A non-disclosure agreement, also known as a confidentiality agreement, is a formally-drafted document that becomes part of your business sale. It is signed by anyone wishing to receive the sales memorandum, which is the initial set of information distributed to interested parties.

The NDA protects the goodwill of the business, and the information that will be disclosed. It is an essential element of selling a business that safeguards your confidential data, facts and figures, and other particulars, from competitor gain.

What can be protected by an NDA?

Various pieces of information that are not publicly available can be protected by a non-disclosure agreement, potentially including:

  • Details of a new product line
  • New technology or innovations
  • Business plans
  • Financial information
  • Databases
  • Customer and supplier name
  • Employee details

What are the main elements of an NDA?

Essential elements of a non-disclosure agreement include detailing the parties to the contract, the specific information that should remain confidential, and the length of time that applies.

Defining the purpose of the provision of this information, and how the information contained in the NDA can be used, should also be clearly stated. In the case of selling your business, this is likely to be for evaluating your business proposition.

You will also need to include details of who the recipient can share this information with – they may need to show their accountant, for example, or their solicitor.

What are the benefits of an NDA when selling your business?

The fact that you are selling your business is, in itself, highly sensitive information in a commercial sense, and using a non-disclosure agreement offers several key benefits even when you trust the other party to maintain confidentiality:

  • Your buyer may already operate in the same industry, in which case, if they decide not to go any further, there is nothing to prevent them using the information provided in the sales memorandum for competitive purposes.
  • If negotiations fail at a later stage and you wish to exit the deal, you can do so knowing that you have a legal claim against the other party should they make use of the disclosed information.
  • If they did use your confidential information for commercial benefit, or indeed in any way other than for the purpose defined in your NDA, you may be able to take legal action against them.

Although they cannot provide guaranteed protection against the future use of your confidential information, non-disclosure agreements offer an effective deterrent which is valuable in itself.

If you would like further information about a non-disclosure agreement for your business sale, contact us at Performance Business Brokers.

Accredited Cosmetology – Aesthetics School for Sale

Established for over 25 years, this institute operates a private for-profit post-secondary school that provides vocational training. The institute offers non-degree, certificate programs within the Cosmetology – Aesthetics industry.

The school is licensed as a Private Vocational School by the Alberta Enterprise and Advanced Education. The programs offered by the school are eligible for student loan funding from the Alberta and Federal student loans program. The fulltime program runs 10 months and has new student intakes each month.

The schools generated gross revenues of $1,1500,000 in 2012 and had impressive profits.

The seller, who is retiring from the business, is looking for a buyer, who is capable of taking the school to another level, for which the foundation is prepared and ready. The school is situated in a beautiful and new location since 2011 with high traffic flow.

The school also enjoys the ability to have additional revenue streams from retail sales of cosmetology – Aesthetic product as well as from services provided by the students while they learn.

The school has a high grad placement rate of 90+% within three months of graduating.

The purchase price of this opportunity is negotiable and this information is intended to ascertain interest in the said business after which open negotiation is invited.

Contact us today at Performance Business Brokers for full information on this unique opportunity at 780-756-2990 or email us at Dwight@performancebb.ca