Series 79: 11.2.12.2. The Confidentiality Agreement

11.2.12.2. The Confidentiality Agreement

While the teaser is typically provided to interested buyers without restriction, any additional information should be withheld until the prospective buyer signs the confidentiality agreement. The confidentiality agreement (CA) (also known as the non-disclosure agreement (NDA)) is a contract between the seller and a prospective buyer limiting the prospective buyer’s ability to disclose or act on the seller’s confidential information. This CA is more elaborate than its counterpart from Chapter 10, because of the multiple ways in which prospective buyers, especially competitors, might be able to exploit any confidential information they receive.

The scope of the CA varies depending on what type of company the seller is and what trade secrets or specific confidentiality concerns it may have, but virtually every company possesses some information it would prefer to keep private. The seller may consider the mere fact that it is up for sale to be confidential information.

The seller should keep in mind that a breach of the confidentiality agreement may be very difficult to prove. If the seller or sell-side adviser is uneasy about disclosing certain information to a specific prospective buyer—a direct competitor