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Could an NDA protect you if you sell your business?

On Behalf of | Aug 26, 2021 | Business Law

There are many reasons to use a non-disclosure agreement for your business. Perhaps you have sensitive trade information that you do not want your competitors to learn, so it makes sense for your partners and employees to sign an NDA. However, you may need an NDA for other situations, such as when you decide to sell your business.

It may seem strange that you would use an NDA while you are trying to sell your company. However, there are steps you should take to protect your trade secrets, even from a prospective buyer.

Presenting information to a buyer

If you find someone who wants to buy you out or acquire your business, you will need to present all of your business information to that prospective buyer. You might feel comfortable with this at first. You might believe divulging the financial and operational information of your company should only serve to attract a sale.

However, you must also provide the trade secrets of your business. Your prospective buyer needs to know what he or she is getting into. This may make sense if you know your buyer will follow through with the purchase. Still, sometimes a buyer may decide to pull out of a deal.

Protect your information from competitors

Your prospective buyer might fail to secure the financing to buy your business. It is also possible your buyer is not as serious as you think about buying your company. The individual may only want to take a look at what you have simply out of curiosity. This becomes a problem if your buyer walks away having learned your trade secrets.

If a competitor puts your trade information into action, it could seriously devalue your business since your trade secrets are no longer confidential. This is why you should consider having possible buyers sign an NDA before giving them any sensitive information. This can give you an option to litigate if a buyer tries to use your trade secrets despite not having bought your business.


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