The Hidden Power of NDAs in M&A: Why Confidentiality Is the First Step Toward a Successful Deal
- Dr Allen Nazeri DDS MBA
- Oct 5
- 5 min read
In the fast-moving world of mergers and acquisitions, timing, trust, and transparency are everything. But before the first financial statement is shared or a single Zoom call takes place, one critical document governs the entire process: the NDA in M&A.
For many business owners, an NDA (Non-Disclosure Agreement) feels like a routine formality — a simple piece of paperwork to get out of the way. In reality, it’s one of the most powerful tools in protecting your company’s value, competitive edge, and negotiating position throughout the sale process.
Understanding the Role of an NDA in M&A
An NDA in M&A is the gatekeeper between public curiosity and private opportunity. It defines what information can be shared, who can see it, and how it can be used. Without it, a seller’s proprietary data, client lists, pricing models, and even employee rosters can become exposed to competitors masquerading as “interested buyers.”
At its core, an NDA in M&A serves three purposes:
Protects confidentiality — ensures financials, operations, and trade secrets are kept private.
Limits use of shared data — buyers can only use the information to evaluate the transaction, not for competitive advantage.
Establishes legal recourse — provides grounds for legal action if confidentiality is breached.
In other words, the NDA sets the tone for professionalism. It tells you a lot about how a buyer will behave later in the deal.
What a Strong NDA in M&A Should Contain
Every confidentiality agreement looks similar — until you examine the fine print. A strong NDA in M&A must clearly define:
What constitutes confidential information. Beyond financials, this includes employee data, vendor relationships, and strategic plans.
Permitted disclosures. Buyers often share data with their advisors, lenders, or counsel. The NDA must specify who those parties are.
Return or destruction of data. At the end of discussions, all documents and electronic files should be returned or deleted upon request.
Non-solicitation clauses. Prevents a buyer from poaching employees or clients if the deal doesn’t close.
Duration of confidentiality. Usually between two and five years — long enough to ensure ongoing protection after negotiations end.
Without these, sellers risk losing control of their most valuable asset: information.
Common Mistakes Sellers Make When Signing an NDA in M&A
Many business owners rush through NDAs without truly understanding the implications. Here are the most frequent mistakes seen by M&A advisors:
Accepting the buyer’s template blindly.Large buyers or private equity groups often use one-sided agreements that favor them. Sellers should always review or customize these to maintain balance.
Failing to define “Representatives.”Without a clear definition, a buyer can share your information with multiple entities, including competitors or portfolio companies.
Ignoring data return obligations.Sellers should ensure that confidential materials are either returned or destroyed once discussions end — a small clause that can prevent major headaches later.
Not including non-solicitation language.An NDA without this protection can allow a buyer to hire your best employees after reviewing your payroll list or organizational chart.
These details may seem small, but in an M&A deal, small details often determine whether you protect your leverage or lose it.
How a Well-Drafted NDA in M&A Builds Trust and Attracts Serious Buyers
A well-constructed NDA in M&A doesn’t just protect — it attracts. Serious buyers appreciate professionalism and confidentiality because it signals that the seller is prepared, organized, and deal-ready.
It also filters out “tire kickers.” Anyone unwilling to sign a straightforward NDA likely isn’t a real buyer. M&A advisors use this as the first line of defense to separate qualified, capitalized investors from information seekers.
When both parties sign an NDA, they’re entering into a framework of mutual respect. The buyer gains assurance that the information they receive will be accurate and complete; the seller gains confidence that sensitive data will remain secure. This mutual trust is what allows the deal to move efficiently toward due diligence and negotiation.
When the NDA Becomes the First Negotiation
What many sellers overlook is that the NDA in M&A is often the first negotiation between parties. How each side approaches confidentiality reveals their style and flexibility.
A buyer pushing to shorten confidentiality duration or expand disclosure rights may indicate future friction in deal terms.
A seller insisting on narrow use of information shows discipline and seriousness — qualities buyers respect.
M&A veterans often say, “How you negotiate the NDA is how you’ll negotiate the LOI.”
Case Insight: Lessons from a Healthcare Transaction
In a recent healthcare transaction handled by our firm, a reputable institutional buyer initially refused to sign an NDA before learning the seller’s name, citing “conflict of interest” checks. While understandable, that request could have exposed the client’s identity to a competitor.
Our approach — a limited disclosure after NDA execution, combined with a 8-hour conflict-notification clause — struck the right balance. It protected the seller while giving the buyer enough flexibility to proceed. The deal later closed successfully, with both sides acknowledging that the confidentiality structure built trust early on.
Why NDAs Matter More in Healthcare M&A
In healthcare, the NDA in M&A carries additional regulatory weight. Patient data, provider contracts, and referral relationships are not just confidential — they’re legally protected under HIPAA and other compliance frameworks.
A breach of confidentiality can not only destroy a deal but also expose the seller to regulatory penalties. For this reason, healthcare M&A NDAs must include explicit language prohibiting any use or disclosure of protected health information (PHI).
At American Healthcare Capital and PRIME exits®, every transaction begins with a strong confidentiality foundation. It’s not just about protecting documents — it’s about protecting reputations, staff morale, and the overall value of the enterprise.
Final Thoughts: The NDA in M&A Is the First Step Toward Value Protection
A well-drafted NDA in M&A is more than a formality; it’s the first handshake of trust in a complex process. It defines the tone of the transaction, protects both sides, and sets the expectation that professionalism governs every interaction to follow.
Sellers who treat the NDA seriously send a clear message:
“We’re open to share, but only with those who respect confidentiality.”
That discipline not only protects sensitive data but also positions the company as a credible, investment-ready enterprise — one that commands attention from the right buyers, not just any buyers.
Dr. Allen Nazeri, aka "Dr. Allen," boasts over 30 years of global experience as a healthcare entrepreneur. He is the Managing Director at American Healthcare Capital and Managing Partner at PRIME exits. Dr. Allen provides strategic growth consulting to leadership teams of both privately held and publicly listed companies, ensuring their preparedness for successful exits.
As an M&A advisor with over a decade of hands-on experience in deal-making, I’ve seen a lot. Deals stall. Offers get withdrawn. Valuations shift. But one of the most common, and underestimated reasons a sale can fall apart is partnership misalignment on the sell-side. Whether it's co-founders, silent partners, or family members with equity stakes, when there's a disconnect in vision, values, or urgency, deals can unravel quickly.
He holds a Dental Degree from Creighton University and an MBA in M&A and Investment Banking from the University of Bedfordshire. Dr. Allen is the author of "Value Engineering: Strategies to 10X the Value of Your Clinic and Dominate the Market!" and the brand new book "Selling Your Healthcare Company at a Premium". Dr. Allen offers a free valuation to business owners ready for a partial or complete exit strategy. Dr. Allen collaborates with strategic buyers, private equity firms, and institutional investors, taking direct accountability for the annual successful sell-side representation of nearly $750M in enterprise value.
To have a confidential discussion about your company and receive a free valuation, please email Allen@ahcteam.com or Allen@ahcpexits.com
You can now communicate with Dr. Allen's clone https://www.delphi.ai/drallen
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