5 Things You Need to Know About Confidentiality Agreements

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 798 words

A confidentiality agreement lets you show a buyer the inside of your company while keeping a legal remedy if that information is misused, but it only works if it is signed before anything identifying is shared and drafted for your situation. Every serious buyer will ask for financials, customer data and operating details. The agreement, often called an NDA (non-disclosure agreement), is what makes that disclosure reasonable.

Here are five things an owner should understand before the first one goes out.

1. Nothing identifying leaves the building before it is signed

The order of events is the protection. A buyer first sees a blind profile: industry, region, size and highlights, with no name. Only after signing the agreement, and at MDR & Associates also completing a financial profile showing they can fund the purchase, does the buyer learn who you are. Owners who send a name to gauge interest have already given away the one fact they most wanted to protect. It also means an interested competitor gets no shortcut: a rival that insists on your name before it will sign anything is telling you how it plans to use the process. The checks that sit behind this step are described in how buyers are screened before receiving confidential information.

2. It must say exactly what is covered and how it may be used

A strong agreement defines confidential information broadly: the fact that the company is for sale, the discussions themselves, financial statements, customer and supplier names, pricing, processes and employee details. It limits use to a single purpose, evaluating the acquisition, and it names who may see the material: the buyer and its advisors, lenders and investors, each bound by the same terms. It should also say what happens to the material if talks end, normally return or destruction, confirmed in writing.

3. How long it lasts is a negotiated point

Sellers want protection that outlasts the deal talks by a wide margin; buyers, especially larger companies and private equity funds, often ask for a fixed term. Your transaction attorney decides what is reasonable for your business. Two points are worth insisting on: the obligations should survive the end of negotiations, and genuine trade secrets, such as formulas, proprietary processes or custom software, should stay protected for as long as they remain secret.

Check what the agreement excludes as well. Standard exclusions cover information the buyer already had, information that becomes public through no fault of the buyer, and disclosures a court orders. These are fair, but they should be drawn narrowly, and the buyer should carry the burden of showing that one of them applies.

4. The special clauses often matter more than the standard ones

• Non-solicitation. The buyer may not hire your employees or approach your customers and suppliers for a set period, whether or not a deal happens.
• No contact. All questions go through your advisor. Nobody from the buyer calls your staff, landlord, lender or customers without permission.
• Intellectual property. Patents, trademarks, designs and know-how get explicit protection, and disclosing them grants no license to use them.
• Governing law and venue. When the buyer is based in another state, the agreement should say which state's law applies and where a dispute would be heard.
• Remedies. Language confirming that you may ask a court to stop a breach quickly, and that the party in breach pays the legal costs of enforcing the agreement.

5. An agreement deters; it does not prevent

No document stops someone determined to misuse information. What it does is make the seriousness plain, create remedies (a court order to stop the misuse, damages and often legal costs) and give you a record of who received what. That is why the agreement is only one layer. Careful screening decides who gets to sign in the first place, and staged disclosure decides what each buyer sees and when: summary figures early, customer names and contracts only late in due diligence, once an offer has been accepted.

Have a transaction attorney draft or review your form. A generic template pulled from the internet rarely covers non-solicitation, return of materials or the governing-law question properly, and those are the clauses you will want if something goes wrong.

How MDR & Associates puts the agreement to work

Every buyer who contacts MDR & Associates registers, signs a confidentiality agreement and completes a financial profile before learning your company's name, and the firm approaches its own database of qualified individuals, capital groups and private equity groups before placing any blind advertising. Disclosure is then staged through each step of the sale process, and the questions owners ask most often are answered on our FAQ page. To learn what your company might be worth without anyone else knowing you asked, begin with the confidential valuation snapshot.

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Questions owners ask next

Will I have to sign a confidentiality agreement too?

Sometimes. A buyer may ask you to keep its identity, its interest and the terms of its offer private, particularly a public company or a private equity fund. That is reasonable. A mutual agreement is fine as long as the protections for your own company are not weakened to make the document symmetrical.

What happens if a buyer breaches the agreement?

Your attorney decides whether to seek a court order to stop further misuse and whether to pursue damages. In practice the record matters most: knowing exactly what was shared, when and with whom. That is why a careful advisor logs every signed agreement and every document released to each buyer.