In any business sale, there is one document that gets signed before any other: the NDA, also known as a confidentiality agreement. It is the gateway to the process. Without a signed NDA, no serious buyer receives the information memorandum, the company's name is not disclosed, and no detailed figures are shared.
Although it seems like a simple document, a poorly drafted NDA can leave the seller without real protection, and an NDA accepted carelessly can tie the buyer to obligations they never intended to take on. In this guide, we explain exactly what an NDA is, the two main types, when it is signed in M&A, which clauses it must include, and the most common mistakes.
What is an NDA?
An NDA (non-disclosure agreement) is a legally binding contract under which one or both parties agree to keep confidential the information they receive during a negotiation or business relationship. In mergers and acquisitions, the NDA protects the seller against the risk of a potential buyer using the information received for purposes other than evaluating the deal: copying the business model, contacting customers, hiring key employees, or leaking data to competitors.
In Spain, an NDA and an “acuerdo de confidencialidad” are exactly the same document — the only difference is the language. The terms confidentiality agreement (CA) and, in some contexts, “confidentiality undertaking” are also used.
What a well-drafted NDA ensures:
- That the information shared is used only to evaluate the deal
- That the circle of people within the buyer's organization who can access it is limited
- That there are obligations to return or destroy the information when the process closes (or is abandoned)
- That there are clear financial consequences in the event of a breach
Unilateral NDA vs. mutual NDA
One of the decisions to make at the start of the process is which type of NDA to sign. It is a practical decision, not a formality, and it has real implications for who can claim protection if information leaks.
In traditional sale processes, the norm is a unilateral NDA: the seller provides information, and the buyer receives it and agrees not to misuse it. When the process involves two companies exploring a merger of equals, a joint venture, or a strategic alliance, a mutual NDA is usually signed.
When is the NDA signed in an M&A deal?
The NDA is signed at the very earliest stage of the process, right after the first contact between the seller and a potential buyer:
The seller's M&A advisor sends an anonymous teaser to a list of potential buyers. Those who show interest must sign the NDA before receiving any identifying information about the company: its name, financial statements, customers, projections. Only then are they given the information memorandum.
In competitive processes with several buyers, a separate NDA is signed with each of them. If a buyer later submits an LOI and moves on to due diligence, the initial NDA is usually supplemented with specific addenda governing access to the data room.
Key clauses of an NDA in M&A
Although each NDA is tailored to the specific deal, good templates always include these clauses:
1. Definition of confidential information. The broader and more precise, the better for the seller. It should include financial, commercial, operational, and technical information, employee and customer data, and the very existence of the deal.
2. Exclusions. Information that is not considered confidential: information that was already public, information the buyer knew before the NDA, or information obtained from a third party with no confidentiality obligation.
3. Permitted use. Restricts the use of the information strictly to evaluating the potential deal. Any other use is a breach.
4. Authorized recipients. Limits who within the buyer's organization can access the information: typically the M&A team, legal and financial advisors and, if the buyer is a fund, its investment committee. Every person in that circle is bound by the NDA.
5. Term of the obligation. Usually set at 2 to 5 years from signing. For especially sensitive information (trade secrets, customer lists), it can be indefinite.
6. Return or destruction of information. When the process ends, whether without an agreement or after closing, the buyer must return or destroy the information received and certify this in writing.
7. No-poach clause (non-solicitation). Prohibits the buyer from hiring the seller's key employees for a set period (usually 12–24 months). It is a critical clause that many standard NDAs leave out, and it is worth adding explicitly.
8. Breach provisions. Defines the consequences: compensation for damages, the possibility of obtaining injunctive relief, and sometimes a fixed penalty (liquidated damages) given how hard it is to prove the specific harm.
9. Governing law and jurisdiction. Especially relevant in cross-border deals. In Spain, the parties usually agree on Spanish law and the courts of Madrid or Barcelona, or international arbitration for large deals.
Common mistakes when signing an NDA in M&A
The most common mistakes we see in lower mid-market and mid-market deals:
- Accepting the buyer's NDA without reviewing it. Institutional buyers (funds, corporates) usually have their own template, drafted to protect them. The seller should negotiate it, not sign it as is.
- Leaving out a non-solicitation clause. Without it, the buyer can use due diligence to identify key employees and hire them later.
- Defining confidential information too narrowly. If it only covers “written financial information marked as confidential,” everything else is left unprotected.
- Terms that are too short. A one-year NDA in M&A is clearly insufficient — the information remains sensitive long afterward.
- Failing to cover access by external advisors. If the buyer's lawyers, auditors, or consultants are not bound by the NDA, there is an obvious gap.
- Relying on generic NDAs downloaded from the internet. They are not specific to M&A and often leave out critical clauses such as non-solicitation or rules for the data room.
Are you about to start a sale process?
The NDA is only the first step, but a bad NDA can compromise the entire process.
At Deale, we support business owners through every stage of the deal, from preparing the documentation to closing, with templates and advice tailored to each buyer's profile.
Talk to our team and prepare the sale of your business with confidence →
