NDA (non-disclosure agreement)

In the sale process, interested parties initially receive only an anonymous teaser. Only after signing the NDA do they receive the company's name, the information memorandum and later access to the data room. The NDA governs which information is confidential, who may receive it, how long the obligation lasts and what happens to the documents if talks are broken off.

For owners of mid-sized companies, the NDA mainly protects against competitors posing as interested parties. Important clauses are a non-solicitation clause for employees and customers and a ban on contacting employees, customers or suppliers directly. A contractual penalty makes enforcement easier, because damage is otherwise hard to prove.

The German Trade Secrets Act protects information only if reasonable confidentiality measures have been taken (§ 2 No. 1 GeschGehG). An NDA is such a measure. Terms of two to three years are common. With strategic buyers who are competitors, staged disclosure is also advisable, for example through a clean team.

Example

Hypothetical example: A seller sends a teaser to 25 interested parties, and 12 sign the NDA. It runs for two years and contains an 18-month non-solicitation clause and a contractual penalty of €50,000 per breach. A competitor that then poaches a key employee owes the penalty without any further proof of damage.

One-way vs. mutual NDA