Entrepreneurs often get the advice from their lawyers and friends to require that a Non-Disclosure Agreement (NDA) or Confidentiality Agreement (CA) – NDA’s for the remainder of this FAQ – be signed before disclosing anything about their new venture/idea/product/etc. Most professional advisors hate them, and refuse to sign them. Here’s why:
An experienced business broker / M&A advisor will ALWAYS secure an NDA from all prospective buyers in advance of releasing any of your confidential information. It’s literally step one when engaging a new prospect on your behalf. It’s their job to disclose appropriate information at the appropriate time to appropriate individuals (i.e. those that have signed their firms NDA). It doesn’t make sense for the person you have representing you to sign their own NDA.
Another reason professional advisors hate being asked to sign NDA’s is that it gets complicated fast. The most sought after advisors talk with over 100 prospects per year. If you signed NDA’s with everyone it wouldn’t take long before the advisor was so limited in who they engaged due to conflicts that they would be out of business.
In summary, if the individual is not familiar to you and poses a competitive risk an NDA is appropriate. If the individual is a professional advisor (Attorney, CPA, Business Broker, M&A Advisor, Venture Capitalist, Angel Investor, etc.) it is generally inappropriate – especially if you are reaching out to them for advice and counsel.
If you are totally risk-averse, then push to always get signed NDAs. Chances are the most experienced and valuable contacts will choose to pass.
Lastly, professionals like the ones listed earlier are in the business of doing transactions. They trade on their experience, networks and reputations. There is little, if any, incentive to violate a prospects confidentiality or trust.