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NDAs: Why They Are Needed?

A non-disclosure agreement, or NDA, can be a very valuable document during the purchase or sale of a business. Perhaps someone has brought up the idea of drawing up an NDA during your current negotiations to purchase or sell a business, and it left you wondering if one is really necessary. Our opinion is that it is, and here's why.

What Is An NDA?

A non-disclosure agreement, also sometimes known as a confidentiality agreement, is a binding contract between two parties that serves to protect confidential or sensitive information. The NDA restricts or forbids the disclosure of such information to any other party.NDAs: Why They Are Needed? transworld minnesota

How NDA’s Benefit the Seller

Under normal circumstances, a business owner will not readily share financial and operational information about his company. If certain sensitive information, such as pricing, supplier data, strategies, or trade secrets was made available to the competition, it could cause irreparable damage. During the sale of the business, however, it becomes necessary to share that information with potential buyers. Once the seller has ascertained that a potential buyer is serious and has the financial ability to make the purchase, he will more readily share that information if an NDA has been signed.

Over the course of the sale and purchase of a business, there are different levels of confidential information that will need to be shared. At the very early stages, a possible buyer will want to see the company's financial statement. This data will give the buyer the vital information to decide if they're interested in pursuing the purchase of this business. As such, a buyer may opt for a separate NDA covering only the financial statement or structure the NDA in such a way that allows for the disclosure of the financials first, followed by more sensitive operational data once the buyer has passed specific milestones.

Buyers not interested in signing NDA’s are likely to be perceived by the seller as not being serious about the purchase, and can, therefore, prevent a lot of wasted time and energy.

How NDA’s Benefit the Buyer

For an entrepreneur looking to buy a business, having a signed NDA is critical to have the ability to study the business in detail. Through a comprehensive examination of the company's records, a potential buyer can analyze its strengths, weaknesses, opportunities and advantages within the current market landscape. It is only with all of this important information that a buyer can determine if the asking price is reasonable.

With an NDA in place protecting the seller's interest, there should be no reason that he or she would want to avoid disclosing any pertinent information. If the seller is less than forthcoming, it may set off alarm bells for buyers and lead them to question the true viability of the business.

What Should Be Included In an NDA?

  • Information about the business, such as its name, address, and the nature of its operations.
  • The duration of the NDA. Most NDAs are in effect for several years.
  • The parties to the agreement. This indicates with whom sensitive information may be shared aside from the buyer.
  • What information is covered by the NDA.
  • How the information will be supplied and when. In most cases, the disclosure takes place at the seller’s office and buyers do not feed with any of the documents.
Find out more about businesses that are currently available for purchase in Minnesota by browsing out current listings.

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Ten Steps To Selling Your Business

Our Sellers except us to achieve the highest and best offer for their business while taking the least amount of their time away from it as possible. That is because the absolute best use of their time is to continue to run and grow the company.  If revenue or profits begin to decline, buyers will walk away or decrease their offer. Transworld's philosophy can be summed up in a ten step, how-to strategy that culminates with the sale of a company. This proven method has been used to sell hundreds of businesses.  Here are the steps. Step1 Comprehensive Business Analysis and Feedback As your business broker, the first thing in our how-to strategy is to analyze your operation, finances, market potential and industry trends. We take that information and advise you on steps to prepare your business for sale, and  generate a business profile that represents your company in the most attractive way possible. Step2 Sale Structure We identify the best possible price range to sell your company. This is based on solid facts, the condition of the market, projected growth, sales potential and the sale of similar businesses within your industry. Transworld’s experts apply sophisticated, time-proven valuation techniques to ensure that your price is appropriate for the current market condition. The price must not be too high or too low. Yet, it must represent an attractive investment potential for the buyer. Step3 Confidentially Network The Business For Sale During the selling process, we utilize the latest technology to present your company to other business brokers and strategic buyers all over the world. This greatly multiplies the effort in your favor. With Transworld Business Advisors, you have literally thousands of industry professionals confidentially representing your company to buyers.   Step4 Confidentially Advertise To Buyers Our aggressive marketing program ensures your confidentiality and provides maximum exposure for your company. Your listing is placed in various industry databases, Internet sites, and publications which are constantly updated. We spend more money in advertising and marketing for buyers than anyone else in our industry. Step5 Control The Information Flow We organize all necessary documentation and release information only as needed. We use limited information when advertising to maintain confidentiality. Buyers are pre-qualified and required to execute a confidentiality agreement before receiving any sensitive business information. Step6 Create Competition For Your Company We attract thousands of buyers, creating competition for your business. Buyers are qualified for financial ability to meet the offer, and we engage you with only the most qualified buyers. Once you meet the best of the buyers, we urge them to prepare and present all offers. We can continue to engage potential buyers on your behalf as negotiation on an offer is in process and have another interested party ready to go should a buyer change their mind. Step7 We Negotiate For You To Achieve The Best Price Appropriate negotiation is crucial to achieving your best price and terms. We have the expertise to establish sound and resourceful negotiating techniques on your behalf. Transworld has trained all of its agents in the art of negotiating through curriculum that we have created specifically for our industry. Never negotiate without planning, expertise, or from a position of weakness. Step8 We Provide Exceptional Support To You Through The Due Diligence Process We take pride in our exceptional service. Only half of the job is finding the right buyer who will pay your price and meet your terms. The other half is getting that buyer to the closing table. We quarterback the deal, work with the accountants, lawyers, banks, landlords, and other third parties that could jeopardize the success of the transaction. We realize that you depend on us to guide you through the sale of your business. We make the transition simple and easy for you. We know when an opportunity for you may arise and are always there to take advantage of it. We also know when someone is trying to kill your deal or is being unreasonable and how to handle those situations. Step9 We Are There From Beginning To The Closing We help manage all administrative procedures, licenses, inventory counts and lease assignments that may be required. Transworld works closely with your advisors to ensure a smooth transition. Using the latest technology, we strive to be ready to work on your behalf to get the deal done! Step10 We Are There For The Transitional Phase And Beyond! Because we are in the business community, you may want to consult us from time to time after the sale. We will provide you with the assistance after closing. Transworld will always remain in your corner! Schedule Consultation Now

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