Comment on Seller making first mistake May 15, 2019

KEN KIRSCHENBAUM, ESQ

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Comment on Seller making first mistake

May 15, 2019

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Comment on Seller making first mistake from article on May 4, 2019

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Ken

I think you have gone too far in your recent email below about signing a Seller signing a mutual NDA or signing any NDA before showing it to their lawyer.

Yes it is true that Sellers should probably show an NDA to their lawyer (particularly if it comes from a large buyer whose legal department has customized the NDA) before signing it but many NDA’s have fairly standard clauses and Sellers are in fact familiar with most of the terms. So in many cases I don’t think the Seller is opening themselves up to great risk by signing the NDA without showing it to a lawyer first. However the Seller should certainly read the NDA carefully and if anything looks unusual then show that to a lawyer. I often get buyers and sellers asking me to change certain clauses in an NDA and I know they have not shown it to a lawyer. Most importantly I have yet to have any “blow-back” on a deal relating to an NDA in the more 15 years that I have been doing alarm deals.

Moreover I think you are simply wrong to say that a Buyer has nothing to protect in asking that a Seller sign a mutual NDA. There is a good chance that the Buyer is going to be giving the Seller a written offer for his business and the Buyer clearly does not want that offer disclosed to other buyers or “shopped”.

So while in theory it is right to involve your lawyer early in the sales process, my experience is that unless you are dealing with large Sellers and Buyers whose legal department write the terms of an NDA, most Sellers and Buyers of smaller firms do sign an NDA without legal advice and as long as the NDA has the standard terms in it I don’t think they are opening themselves up to great risk.

Regards,

Victor Harding
Harding Security Services Inc.
Toronto, ON M4T 1A3
416.925.7474
victor@hardingsecurity.ca
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Response
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Well, I’ve been wrong before, but not this time. You agree that a Seller should show the NDA to a lawyer, but only when it comes from a large buyer. Why is that? Large buyers have less scruples than small buyers? Haven’t you heard, size doesn’t matter. You also don’t think seller is opening itself up to “great risk” by showing the NDA to its lawyer. Why is that? Maybe its lawyer is an idiot or incompetent?
Next you opine that the seller should read the NDA and show it to a lawyer only if “anything looks unusual”. Do you think sellers sell their business like they buy their shoes? Looks good and fits, no need to go to a podiatrist. It’s fortunate you haven’t seen blowback, yet. Most people will tell you their dog hasn’t bitten anybody, yet.
Maybe I am wrong about a buyer wanting confidentiality. You point out that a buyer would not want its offer disclosed by a seller who may be using the offer as a bargaining chip with another. I don’t think an NDA would be effective for prohibiting a seller to use an offer to negotiate a better price from a competitor, especially if the seller doesn’t disclose that buyer tendering the offer. I have a deal pending now where the buyer won’t even use its own name on anything. We get code words referencing the deal. I can’t even comment further on this because I can’t type while I am laughing so hard.
A buyer who doesn’t want its potential offer or even its potential involvement in a possible transaction can make that clear without resorting to a mutual NDA. It’s simply not an even exchange of information. What this paranoid buyer wants and needs is hardly the same as the information the seller will be disclosing. There is nothing mutual about it.
I am not opposed to a broker or buyer requesting a level of confidentiality. But it doesn’t belong in the NDA a seller needs, except as an added paragraph to the seller’s NDA. Finally, why would a broker suggest or counsel a potential seller [or buyer] that a lawyer isn’t needed?
By the way, sellers [and paranoid buyers] can get an NDA here http://www.kirschenbaumesq.com/page/alarm-contract It works for the "large" companies and the small companies. It just works, and a lot better.
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Ken Kirschenbaum,Esq

Kirschenbaum & Kirschenbaum PC

Attorneys at Law

200 Garden City Plaza

Garden City, NY 11530

516 747 6700 x 301

ken@kirschenbaumesq.com