Effectively Using Confidentiality Agreements
Every year many great deals, deals that would have otherwise gone through, are undone due to a failure to properly use and follow confidentiality agreements. Not adhering to this essential contract can lead to a myriad of problems. Employees discover a business is going to be sold and quit, competitors learn the business is for sale, or key customers learn of the potential sale and take their business elsewhere. Such issues can block a sale from successfully going through. Maintaining confidentiality throughout the sales process is of paramount importance.
Business buyers and sellers should fully embrace confidentiality agreements, often referred to as a non-disclosure agreements. Among the many and diverse benefits of working with a business broker is that business brokers know how to properly use confidentiality agreements and what they should contain.
Sellers who use a confidentiality agreement are protected from a prospective buyer disclosing confidential information during the sales process. Originally, such agreements were used to prevent prospective buyers from letting the world know that this business was for sale. Today, these contracts have evolved and now cover an array of potential seller concern such as ensuring that a prospective buyer doesn’t disclose proprietary information, trade secrets or key information they learned during the sales process.
Every business and every situation is different. As a result, confidentiality agreements must be tailored to each business and each situation. A solid confidentiality agreement should include, first and foremost, what areas are to be covered by the agreement, i.e., specifying what is and is not confidential. Other areas to be addressed include how confidential information will be shared and marked, the remedy for breaches of confidentiality, the terms of the agreement such as how long the agreement is to remain in force.
One key area in a confidentiality agreement is that the prospective buyer agree not to hire any key people away from the selling company.
When it comes to selling a business, few factors are as critical as establishing and maintaining confidentiality. The last thing any business wants is for its confidential information to land in the hands of a key competitor. Business brokers understand the value of maintaining confidentiality and know what steps to take to ensure that it is maintained throughout the sales process.