December 4, 2009

Showing muscles…

We make a non-disclosure agreement (NDA) with each prospective buyer before we disclose the name of our client and before we supply them with detailed information. I can say that we have a fairly good NDA, prepared as a result of over 20 years of consultancy experience in buying and selling company shares.

When we called a German company that was the second biggest company in the world in its field, as a prospective buyer for one of our clients, they informed us that they were very interested in our client’s company and told us to send them the NDA immediately. The person asking for the NDA was a member of the board of directors of the German company. During our telephone conversation we did not forget to mention that we were in contact with 261 companies worldwide concerning this project. Then, we sent them the NDA.

The next day we received a message from him telling us that he has made some small changes in our NDA, which he believed would not create any problems for us. He asked for our confirmation of this updated NDA so that he could sign the new version to receive detailed information about our client. When we looked over the updated NDA attached to his message, we saw that our original NDA was almost completely discarded and in its place an agreement was put, which placed no responsibility on the German company. We then informed this German company, which had a turnover of milliards of Euro, that we had to take them out of our list of contacts if they did not sign the original NDA we had sent them.

After 2 days following our message to the German company, our client called me to learn if we had any further news. When he learned that we had not received any answer to our last message, he said “What does it matter? They are number 2 in the world in our sector.” and tried to force me to accept the terms of the German company. The pressure of our client increased in the following days. Each time I told my client, “Do not worry; they will sign our NDA”, our client asked me how I could know this. When I answered, “from experience”, I knew he was not satisfied with my answer.

To cut a long story short, we received by fax 9 days after our last message, a copy of our original NDA signed by our contact in the German company. When I informed our client about this development, he relaxed considerably and said, “I have been worrying during this wait; please explain to me the key of this mystery.” I told him, “If that board member had not signed the agreement, he would easily loose his position in the company.” When he was asked in the future about the reasons of loosing such an acquisition opportunity, he could not say, “There were some issues in the NDA over which we could not agree.” They were just trying to see how strong our muscles were…

By not agreeing with their far from logical requests at that initial stage, we had been able to block further such requests that they could come up with in the future.

Approximately 4 weeks later the representatives of that German company came to visit the premises of our client. They came as a group of 5… flying in on their private company plane…

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