Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

November 24, 2009

Confidentiality Agreements: Their Importance To Business Buyers And Sellers

By Joseph Eneldas

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If you are planning to buy a business in the near future, or sell one for that matter, then you are probably thinking about the price you may have to pay, scheduling business appraisers, collating legal documents, putting in an offer and so on. The list of things to do is indeed long. However, one if the things that very few people actually consider before their lawyers bring it up is the necessity of confidentiality agreements.

Confidentiality agreements are essential cogs in the mechanism of business acquisition because they protect both the buyer and seller just in case anything should go wrong a little further down the line.

The Nature Of The Confidentiality Agreement

Confidentiality agreements are legally binding documents that govern what can and cannot be disclosed to third parties. Obviously any potential seller is legally required to make full disclosure of all relevant details that may affect the sale of the business to the buyer, which is why confidentiality agreements are signed before the buyer can examine the business.

Confidentiality agreements are commonly drafted by lawyers and can be pages long, depending on the level of security required to protect the information that may or may not be disclosed. This is obviously dependent on the type of industry and nature of the business.

However, buyers may want to consult with third parties about future business issues to determine whether or not the acquisition would be worth their while and so it is common for any given agreement to be negotiated between the legal teams of both parties to decide what information must remain between the buyer and seller and what can be revealed to relevant parties, and they are usually named within the agreement paperwork itself. Until the negotiations are complete, no information will pass between the buyer and the seller at all.

There can be any number of items included in the individual agreement, inclusive of but not limited to sensitive paperwork, accounts, privileged information, intellectual property, technical knowledge, staffing records and the value and nature of assets. All of these items are unique to any business and can affect its reputation and trade in the future, as well as the overall value. As such, confidentiality agreements can protect the seller just as well as it does the buyer

Business Brokers And Confidentiality Agreements

However, individuals and companies that are selling their businesses are not the only ones that may ask you to sign confidentiality agreements. Business brokers may also ask for confidentiality agreements to be signed before they even show you a business that you may like to buy. This is also to protect their interests. If they show you a business for sale, there is nothing to prevent you from going directly to the seller or another business broker and taking the sale elsewhere. As such, introductions are often made under legally binding paperwork.

The main thing to remember though, whoever is asking you to sign a confidentiality agreement, it is completely normal and protects the interests of all of the parties concerned, including yours!
Courtesy, GlobalBX November 2009

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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Client Testimonials

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer
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Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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