Non-disclosure agreements

BY MATTHEW D. MOHR

When buying or selling a business, one key document is a non-disclosure agreement. Well-written non-disclosures make it clear the parties involved are limited or prohibited from sharing information gained during the evaluation process. Some go much further to include broad language which may or may not be beneficial to both parties.

Recently I was offered a business which another entity I’m involved with competes against. I was identified as a buyer due to my having competing interests. The non-disclosure included language which effectively disallowed pirating information to compete against the business being sold. Naturally, I contacted the representative and explained their broad language would prevent me from moving ahead with any acquisition analysis. The language in this non-disclosure was included to prevent someone from sharing trade secrets but it effectively eliminated many potential buyers.

At one time a business owner contacted me to purchase his business right at the time he was selling to someone else. I had moderate interest, but it quickly became evident he wanted to use me to get a better price from his current buyer. What he didn’t know was that the other buyer, who lived outside our region, was a personal friend of mine. They had no non-disclosure. It didn’t take long to recognize this ploy to use me as a negotiating tool. My friend called me asking why I was trying to take over the business, or push him out of the deal. After informing my friend I was not an active buyer and the seller was trying to push the price up by using my name as leverage, my friend quickly closed the deal at a favorable price. As you might suspect, other parts of the business were found to be somewhat misrepresented by the seller as well. Well-written non-disclosure agreements are good for both buyer and seller and are an essential part of most business acquisitions. PB

Matthew D. Mohr CEO, Dacotah Paper Co. mmohr@dacotahpaper.com