Critical Red Flags in NDA Negotiations
Warning signs that should make you seriously reconsider the transaction
Refusal to Sign Any NDA
A counterparty unwilling to commit to basic confidentiality obligations likely has something to hide or no genuine interest in a fair transaction.
Warning Signs
- "We don't sign NDAs" despite requesting confidential information
- Endless delays without substantive objections
- Verbal promises in lieu of written agreements
Extreme One-Sided Terms
NDAs so heavily weighted that they reveal bad faith or intent to use the agreement as a weapon rather than protection.
Warning Signs
- Perpetual standstill with no fall-away provisions
- Unlimited liability for any breach
- Broad definitions that cover publicly available information
Unreasonable Time Pressure
Artificial urgency designed to prevent proper review often indicates hidden problems or manipulation tactics.
Warning Signs
- "Sign by end of day or we move to other buyers"
- Refusal to allow legal review
- Manufactured deadlines with no legitimate basis
Constant Requirement Changes
Moving goalposts during NDA negotiation predict endless renegotiation during the actual deal, wasting time and resources.
Warning Signs
- Accepted terms suddenly reopened without explanation
- Different representatives demanding conflicting provisions
- "Final" versions that keep changing
Resistance to Standard Carve-Outs
Refusal to include standard exclusions suggests the counterparty may later claim ordinary business activity breaches the NDA.
Warning Signs
- No exclusion for publicly available information
- No independent development protection
- Rejection of legal compulsion disclosure rights
Excessive Non-Solicitation Demands
Overly broad employee restrictions suggest the seller is more interested in protecting against competition than completing a deal.
Warning Signs
- No-hire provisions extending to all employees
- Restrictions lasting 3+ years
- No exception for general advertisements
Resistance to Residuals Protection
Absolute refusal to include any residuals clause may indicate plans to later claim your normal business operations violate the NDA.
Warning Signs
- Treating all general knowledge as protectable
- Requiring "memory wipe" for diligence participants
- Restrictions on working in the same industry
Asymmetric Information Rights
When the counterparty demands extensive access while refusing reciprocal disclosure, the playing field is intentionally uneven.
Warning Signs
- One-way confidentiality in what should be mutual
- Extensive buyer disclosure, minimal seller transparency
- Audit rights without reciprocity
Behavioral Red Flags Beyond the Document
Lawyer as Bad Cop
When the business team is friendly but their lawyers are unreasonable, expect the same dynamic throughout the deal.
Ghosting During Negotiations
Disappearing for days or weeks during NDA discussions predicts communication problems during time-sensitive deal phases.
Lack of Internal Alignment
When you receive contradictory positions from different team members, decision-making dysfunction will plague the transaction.
Excessive Formality
Refusing any phone calls or insisting on purely written negotiation often indicates distrust or intent to create paper trails for litigation.
Last-Minute Changes
Adding new requirements after handshake agreement signals a counterparty who will continue extracting concessions at every stage.
Blaming External Forces
"Our board/investors/lawyers require this" for unreasonable terms may be true, or may be a negotiating tactic that will repeat throughout the deal.
The Cost of Ignoring Red Flags
6-18 Months
Average time lost on failed M&A deals
$500K - $5M+
Typical diligence costs wasted
Team Burnout
Key personnel distracted from operations
Missed Opportunities
Better deals foregone while chasing bad ones
Walk-Away Decision Checklist
Check each red flag you've observed. Three or more checked items strongly suggests walking away.
Refusal to provide reasonable review time
Less than 48 hours to review complex NDA
Terms changed after verbal agreement
Accepted terms reopened without explanation
No standard exclusions accepted
Public info, prior knowledge, independent development excluded
Perpetual or 5+ year confidentiality term
Unreasonably long obligations for general business information
Aggressive standstill with no fall-away
Locked out even if seller shops deal to competitors
Unlimited or uncapped liability
No limitation on damages for any breach
Refusal to allow advisor disclosure
Cannot share with legal, accounting, or financing sources
Bad faith negotiation tactics observed
Threats, manipulation, or dishonesty during discussions
Proceed with Caution
No significant red flags detected. Continue negotiations but stay vigilant.
Professional Exit Strategies
How to walk away while preserving relationships and reputation
The Graceful Decline
Exit professionally when the deal simply doesn't work for you, without burning bridges for future opportunities.
- Thank them for their time and engagement
- Cite "fit" or "timing" rather than specific objections
- Leave door open for future discussions
- Return any materials received promptly
The Terms Impasse
When negotiations fail on specific issues, document the impasse clearly for the record.
- Summarize final positions in writing
- Explain why your position is market standard
- Offer to reconsider if their position changes
- Document good faith negotiation efforts
The Clean Break
When behavior is egregious, sometimes a swift, complete exit is the only appropriate response.
- Brief written notification of withdrawal
- No detailed explanation required
- Immediate cessation of all discussions
- Document concerning behavior for your records
Related Resources
More M&A NDA guidance and tools