Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

November 24, 2009

Confidentiality Agreements: Their Importance To Business Buyers And Sellers

By Joseph Eneldas


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

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Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

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Eric H., Investor

“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.”

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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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