Core Negotiation Principles
Foundational strategies that guide successful M&A NDA negotiations
Understand Leverage
The party with more alternatives typically sets the baseline. A competitive auction favors sellers; a distressed sale favors buyers. Adjust your strategy accordingly.
Prioritize Key Terms
Not all provisions matter equally. Focus negotiating capital on standstill, non-solicit, residuals, and term length. Concede on formatting and boilerplate.
Build Relationship
The NDA sets the tone for the entire transaction. Aggressive overreach signals difficult negotiations ahead. Professional flexibility builds trust.
Tactical Negotiation Moves
Proven tactics for achieving your negotiation objectives
First Draft Advantage
Both PartiesWhoever provides the first draft sets the baseline from which all negotiations proceed. Each party naturally anchors to the initial language.
Key Tactics
- Have your preferred form ready before discussions begin
- If you receive the first draft, redline aggressively but professionally
- Include some provisions you expect to concede as negotiating chips
Time Pressure Response
Buyer FocusSellers often push for rapid NDA execution to maintain deal momentum. Buyers should resist artificial urgency that could lead to unfavorable terms.
Key Tactics
- Request reasonable review time (48-72 hours minimum)
- Counter artificial deadlines with specific concerns
- If time-pressed, focus only on deal-breaker provisions
Package Negotiations
Both PartiesTrade concessions across multiple provisions rather than fighting each point individually. Create win-win outcomes through strategic packaging.
Key Tactics
- Offer: "We'll accept your standstill if you agree to residuals"
- Identify provisions where costs differ between parties
- Present multiple options: "We can do A or B, your choice"
Market Standard Reference
Both PartiesInvoke market standards to depersonalize negotiations and add legitimacy to your positions. Particularly effective when backed by data.
Key Tactics
- Reference recent comparable transactions
- Cite industry-standard terms from reputable sources
- Have your advisors confirm market norms
Escalation Strategy
Buyer FocusWhen negotiations stall with opposing counsel, strategic escalation to business principals can break deadlocks. Use sparingly to maintain credibility.
Key Tactics
- Frame issues as "business decisions" not legal technicalities
- Prepare clear explanations of business impact
- Reserve escalation for truly material issues
Walk-Away Preparation
Both PartiesKnow your BATNA (Best Alternative to Negotiated Agreement). Willingness to walk away is the ultimate source of negotiating power.
Key Tactics
- Define your absolute deal-breakers before negotiating
- Cultivate alternative targets or buyers
- Never bluff about walking away unless prepared to do so
Clause-by-Clause Negotiation Guide
Detailed positions and compromise strategies for each major NDA provision
Standstill Clause
Buyer Position
- Seek shortest possible duration (6-12 months)
- Require "fall-away" if seller shops deal to others
- Carve out private conversations with board members
- Allow confidential proposals if board requests
- Resist "don't ask, don't waive" provisions
Seller Position
- Maximum duration (18-24 months)
- Broad restrictions on share acquisitions
- Prohibition on public statements about transaction
- Include "don't ask, don't waive" protection
- Restrict proxy contests and board solicitation
Common Compromise
12-month standstill with automatic fall-away if seller enters into acquisition agreement with third party. Allows confidential requests to waive standstill (eliminating "don't ask, don't waive").
Residuals Clause
Buyer Position
- Broad residuals rights for "unaided memory"
- No restrictions on hiring personnel who viewed information
- Protect ability to develop similar products/services
- Exclude only truly proprietary technical specifications
Seller Position
- No residuals clause at all
- If residuals required, limit to general industry knowledge
- Exclude all customer data, pricing, and technical information
- Require "clean team" restrictions for sensitive data
Common Compromise
Limited residuals for general knowledge retained in unaided memory, excluding specifically identified trade secrets and customer-specific information. Clean team protocols for most sensitive technical data.
Non-Solicitation of Employees
Buyer Position
- No non-solicit or limit to named key employees only
- Exclude employees who respond to general advertisements
- Short duration (12 months maximum)
- Carve out employees terminated by target
- Limit to employees actually contacted during diligence
Seller Position
- Broad non-solicit covering all employees
- Include no-hire provision, not just non-solicit
- Extended duration (18-24 months)
- Cover independent contractors and consultants
Common Compromise
Non-solicitation (not no-hire) for employees directly involved in due diligence presentations for 12 months. Excludes responses to general advertisements and employees who initiate contact.
Term and Survival
Buyer Position
- Shorter confidentiality period (18-24 months)
- Automatic termination if deal closes
- Trade secret protection tied to actual trade secret status
- Clear sunset provisions for all obligations
Seller Position
- Longer confidentiality period (3-5 years)
- Indefinite protection for trade secrets
- Separate survival for non-solicit provisions
- Obligations survive deal termination
Common Compromise
2-3 year confidentiality period for general information; trade secrets protected for as long as they maintain trade secret status under applicable law. NDA superseded by definitive agreement upon closing.
Permitted Disclosures
Buyer Position
- Broad carve-outs for all advisors and financing sources
- Include potential co-investors and consortium members
- Allow disclosure to existing lenders under existing NDAs
- No prior consent requirement for specified categories
Seller Position
- Narrow list of permitted recipients
- Require notice before disclosing to financing sources
- Approval rights for co-investors or consortium members
- Each recipient must sign separate undertaking
Common Compromise
Automatic permission for legal/accounting/financial advisors and established financing sources bound by professional duty or existing NDA. Notice (not approval) required for co-investors, with seller right to require direct NDA.
Quick Reference: Standard Market Terms
Confidentiality Term
2-3 years standard
Standstill Duration
12-18 months typical
Non-Solicit Period
12 months common
Negotiation Time
3-7 days average
Related Resources
Continue your M&A NDA journey with these related guides