A non-disclosure agreement (NDA) is the contract a prospective buyer signs before a seller opens its data room, binding the buyer to keep the target’s confidential information secret and to use it only to evaluate this transaction — not for any competing purpose, and not indefinitely.
On scope, treadstonelaw.ca advises to “define specifically what information is covered — technical data, financial projections, customer lists, source code, business strategies” and to avoid a definition that is either too broad to be enforceable or too narrow to protect what actually matters. For a fund’s diligence team, that means checking the NDA names the specific categories of data-room material — margin detail, customer concentration, employee compensation — before signing, not relying on a generic catch-all.
On how long the restriction lasts and what happens if it is breached, the same source puts “a reasonable range for an Ontario commercial NDA” at “two to five years from the date of disclosure or from the termination of the relationship,” and recommends the agreement acknowledge breach causes “irreparable harm,” making “injunctive relief — a court order stopping the breach immediately” the intended remedy. (treadstonelaw.ca) That guidance is written for Ontario small business owners generally, not for M&A specifically — the same scope, duration and remedy provisions are what a fund’s own NDA in a deal process should carry.
An associate at a PE fund is granted data-room access to a $22 million dental services roll-up target only after signing a three-year NDA restricting use of the seller’s patient-mix and margin data to evaluating this specific transaction. Six months later, having walked away from the deal, the fund is approached by the seller’s former partner about a similar target in the same region. The NDA’s three-year term and its restriction to “evaluating this transaction” would still bar the fund from applying what it learned about the first seller’s margin structure to underwrite the new opportunity.
See also: Indication of interest (IOI) · Letter of intent (LOI) · Triaging inbound deal flow without missing the good ones.
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