A contract by which the parties commit to not disclosing confidential information shared during the negotiations of an M&A transaction.
Confidentiality is the foundation on which every M&A transaction is built. The NDA is the document that formalises that commitment. It may seem like a routine formality — something you sign before the “real” negotiation begins — but in practice, it sets the rules for how sensitive information about your company will be handled throughout the entire process.
An NDA (Non-Disclosure Agreement), also known as a confidentiality agreement, is a legally binding contract between two or more parties in which they agree not to disclose confidential information shared during the course of negotiations. In M&A, the NDA is typically the first document signed, often before the seller shares any material financial information with a potential buyer.
The NDA establishes:
Confidentiality is not an abstract principle in M&A — it has concrete business consequences:
Protecting employees. If word leaks that the company is for sale, key employees may start looking for other jobs. The uncertainty is corrosive. A single departure at a senior level can damage the business and reduce its value.
Protecting customer relationships. Customers who learn their supplier is being sold may begin evaluating alternatives, especially if the rumoured buyer is a competitor or an investor they do not know. Revenue loss during a sale process is a real and frequent risk.
Protecting supplier terms. Suppliers may tighten credit terms if they fear instability. This can create cash flow pressure at exactly the wrong moment.
Preventing competitive harm. The information shared during an M&A process — margins, pricing strategies, customer lists, product development plans — is extremely sensitive. If a buyer who does not proceed passes this information to a competitor (or is a competitor), the damage can be severe and lasting.
Preserving the seller’s negotiating position. If the market knows a company is for sale, the seller’s leverage diminishes. Buyers may assume there is urgency and offer lower prices. Competing buyers may coordinate rather than compete.
Not all NDAs are equal. Several clauses deserve particular attention:
Definition of confidential information. The broader the definition, the better the seller is protected. The buyer may try to narrow the definition by excluding information that is “publicly available” or “independently developed.” The seller should ensure these carve-outs are tightly drafted.
Non-solicitation of employees. A critical clause: the buyer should agree not to hire or solicit the seller’s employees during the confidentiality period. Without this, a buyer who walks away from the deal could cherry-pick key talent.
Standstill provisions. In some cases, the NDA includes a provision preventing the buyer from making unsolicited approaches to shareholders or the board for a defined period. This protects the seller from hostile moves.
Obligation to return or destroy information. If the transaction does not proceed, the buyer should be required to return or destroy all confidential information received. In the digital age, this is harder to enforce than it sounds, but the obligation should still be there.
Governing law and jurisdiction. In transactions involving international parties, the choice of governing law and dispute resolution forum matters. In domestic Spanish transactions, this is typically less contentious.
A mid-market company in the industrial sector begins a structured sale process. The M&A advisor prepares an anonymous teaser (a one-page document describing the opportunity without revealing the company’s identity) and sends it to 15 pre-qualified potential buyers.
Of those, 10 sign NDAs and receive the confidential information memorandum (CIM). The NDA specifies that the information may only be used to evaluate the acquisition, may not be shared beyond each party’s core deal team, and that the mere existence of the discussions is confidential. It includes a non-solicitation clause covering employees for 18 months.
During the process, one potential buyer — a competitor — requests access to the data room but is ultimately unsuccessful. Six months later, the competitor launches a product that seems suspiciously informed by information shared during the process. The seller, relying on the NDA, has legal recourse. Without the NDA, the seller would have no contractual basis for a claim.
Yes. Before sharing any material information about your company — financial data, customer names, pricing, margins — you should have a signed NDA in place. The only exception is the very first conversation, which should be conducted using non-confidential information (a generic description of the industry, the rough size of the company, the type of transaction being considered). Once the conversation moves to specifics, the NDA must be in place.
This is a serious red flag. A legitimate buyer who is experienced in M&A will sign an NDA without hesitation — it is standard practice. A refusal suggests either a lack of seriousness, a lack of experience, or an unwillingness to be bound by confidentiality obligations. In any of these cases, the seller should not proceed.
Yes, NDAs are enforceable contracts under Spanish law. However, proving a breach can be difficult, especially when the confidential information has been used indirectly rather than directly disclosed. This is why well-drafted NDAs include clear definitions, specific obligations, and practical mechanisms (such as return/destruction of information) that make breaches easier to identify and prove.
If you wish to explore a potential collaboration or present an investment opportunity, we invite you to contact us. We guarantee absolute confidentiality in all our conversations.