Chapter 7: Confidentiality and NDAs when selling a business

The rumour that a business is for sale can in itself damage it. Employees become uneasy and look for other jobs, customers start looking around for alternatives, suppliers tighten their payment terms, and competitors actively use the news in their sales pitch. That is why confidentiality is one of the most important considerations throughout the sale process — and the non-disclosure agreement (NDA) is the most important tool.

What does an NDA protect?

An NDA is an agreement in which the buyer undertakes to keep the information he or she receives confidential and to use it only to assess the acquisition. An NDA does not in itself prevent the information from being misused, but it makes clear what has been agreed, deters buyers who are not serious and gives you a legal basis if the agreement is breached. Use Sitavo’s non-disclosure agreement.

What an NDA should contain

• The parties: Who is bound — the buyer personally, the buyer’s company or both? Advisers and sources of finance with whom the buyer shares the information should also be covered.
• What is confidential: A broad definition that covers both written and oral information, as well as the very fact that the business is for sale.
• Purpose: The information may only be used to assess and complete the deal.
• Exceptions: Information that is already public, or that the buyer lawfully held beforehand.
• Return and deletion: What the buyer must do with the material if the deal does not go through.
• A ban on contacting employees, customers and suppliers without your permission.
• A ban on poaching your employees and customers for a period (non-solicitation).
• Duration: How long confidentiality applies — often a few years after negotiations have ended.
• Consequences of a breach: Damages and possibly an agreed penalty.
• Governing law and jurisdiction.

Share information in stages

Even with an NDA in place, you should not share everything at once. The further the buyer has progressed in the process, and the more serious they have proven to be, the more information you can share.

• Anonymise customer lists (Customer A, B, C) until late in the process, especially towards competitors.
• Show rather than hand over: Let the buyer view sensitive documents in the data room or at a meeting instead of sending them.
• Never give out passwords to systems, hosting, payment solutions or advertising accounts before the handover. Share screenshots, reports or read-only access instead.
• Keep a log of what you have shared with whom and when.

Traceability in the data room

An NDA is easier to enforce when you can document who has seen what. The listing’s data room on Sitavo helps with that:

• Watermark: PDFs and images the buyer downloads get a watermark with the buyer’s name, email and date. Your original is never changed.
• Activity: You can see which documents each buyer has opened or downloaded, and when.
• Access expiry: You can give a buyer access for a set number of days or until a specific date.
• Revoke access: If you choose another buyer, you can close access with a short explanation. The confidentiality agreement still applies.

Internal confidentiality

It is not only buyers who can spread the rumour. Think about who needs to know what, and when. Many sellers choose to involve one or two key employees early — for example because they need to help gather documentation, or because the buyer wants to meet them — and only inform the rest once the deal is in place.

• Enter into a separate confidentiality agreement with the key employees you involve.
• Consider a retention bonus for key employees, paid out once the deal has been completed and they have stayed for a period.
• Hold meetings with buyers outside working hours or away from the business.
• Use a private email address or Sitavo’s messaging system, not a shared inbox.
• Do not put sales documents on shared drives that others have access to.

If the rumour gets out

Even with the best planning, a leak can happen. So prepare a short, honest answer in advance. Do not deny it — that damages your credibility when the truth comes out. A neutral answer could be: “We are continually looking at how the business can best develop in the future, including in terms of ownership. Nothing has been decided, and day-to-day operations continue unchanged.”

1. Find out how the rumour arose and whether an NDA has been breached.
2. Talk to key employees personally before the rumour spreads further.
3. Contact the most important customers and suppliers if there is a risk that they will hear it from elsewhere.
4. Consider with your lawyer whether the breach gives grounds for bringing a claim.
5. Assess whether the timetable for the sale should be brought forward.