Selling a dental practice can be an exciting time. However, don’t let all the fast-paced negotiations and sales tactics keep you from forgetting important paperwork. NDAs are a type of legal document that can be very important during any business sale. To see if an NDA is right for your situation, learn more about what they are and how they work.
What Is an NDA?
NDA stands for a non-disclosure agreement. It is a type of legal document that ensures confidentiality among various parties. When a person signs an NDA, they agree not to discuss a set number of topics in public. If they do share confidential information with anyone, the injured party can sue them for quite a lot of money. NDAs are commonly used when negotiating any sort of sales. Both the buyer and the seller may sign an NDA at various times throughout the sales process.
There are many types of NDAs, including ones that require secrecy for a set amount of time and ones that require secrecy forever. An NDA can be a unilateral agreement, where one person agrees to secrecy, or it can be a mutual agreement where all parties agree to secrecy. Some NDAs may be very broad, requiring the party to avoid discussing anything about the potential sale, while others may just want certain proprietary information, like patient contact information, to remain private.
Benefits of Using an NDA During Your Dental Sale
If you’re planning on selling your practice, should you create or sign any NDAs? There are all sorts of reasons you might want to use NDAs. First of all, NDAs are a standard business agreement. Most prospective buyers will want you to sign one because it can make it hard for them to negotiate future sales if everyone knows their financial status. Therefore, refusing to sign an NDA can end up harming a potential sale.
Even more importantly, an NDA will protect you. As a business owner, you have a lot of sensitive information about things like your company’s finances, your number of patients, and who your key employees are. If this information was leaked, it could harm your ability to negotiate with other prospective sellers. Furthermore, if the sale doesn’t go through, sharing this information could make it harder for you to run your business or compete against nearby offices.
Potential Downsides of NDAs
As you can see, a good NDA will help protect both you and any interested sellers. However, not all NDAs are positive. Some unethical businesspeople may try to use problematic NDAs as a scare tactic. It is essential that you and your legal representation carefully examine an NDA before signing it. Some warning signs to be aware of include:
- Limiting access to advisors: Never sign an NDA that tries to say you can only discuss things with a certain legal or financial advisor. You should be free to seek assistance from any competent professional.
- Attempts to avoid contact between parties: Some unethical brokers may try to keep dentists from talking directly to buyers. This can be an attempt to keep you from working with other parties or frankly discussing your business.
- Overly broad non-compete clauses: Read NDAs carefully to ensure you can still practice at another office if desired. Some buyers may try to sneak non-compete clauses into an NDA, and excessively strict non-compete clauses can make it hard for you to continue in the industry.
How to Create a Beneficial NDA
Of course, if you have a good legal advisor, you will not be writing any NDAs yourself. However, it’s still a good idea to understand what goes into an effective NDA. First of all, you need to make sure the language is very clear. It should state exactly what disclosed information is confidential. These are some of the things you might want to include in your NDA:
- Any financial data
- Information about software and technology you use
- Details on sales, customers, and clients
- Any business practices, strategies, or techniques you use
- Research you’ve done on the future of your business
- Contact and identifying information for you and your employees
- The reason for your sale
The NDA will also need to identify exactly who must keep the information confidential. This can include you, the buyer, any brokers, and other involved employees or contractors. It should state exactly what the penalties are for breaking the NDA and discuss how long this information must remain private.
Ultimately, NDAs are a very useful tool in most dental practice sales. However, if you don’t have a lot of experience in the world of sales, they can seem a little complex and confusing. Don’t forget that Henry Schein Professional Practice Transitions is here to help. Our team can assist you with creating NDAs or examining NDAs before you sign. We also provide assistance with every other step of selling a practice, including valuing your practice, negotiating sales, and planning transitions. Contact us today to learn more about all our services.
References:
[1] https://www.investopedia.com/articles/investing/041315/how-ndas-work-and-why-theyre-important.asp
[2] https://dentalpracticetransitions.henryschein.com/blog-buying-a-dental-practice-are-you-signing-an-unethical-non-disclosure-agreement/
[3] https://www.gglawoffices.com/contracts/non-disclosure-agreements-buying-or-selling-a-business/
[4] https://www.ddslawyers.com/non-disclosure-agreements-in-dental-transactions
