Q: Can I share transaction details w/a business broker/consultant without breaching a business contract? and with a lawyer?
I recently sold my business. The asset purchase agreement signed by both parties states neither party can disclose details of the transaction for 3 years after closing. I want to share details of the business I sold (such as closing price, terms, EBITDA, brand) with a business broker. The reason for sharing such information is to gain industry info (since consultant was involved w/other similar deals in the same industry) to evaluate a possible lawsuit. He will only be able to inform me accurately if I share my deal. Would I be breaching the APA? How can I protect myself from the broker not disclosing the information I present? Please note, the broker will not be hired or paid for gaining the information. The situation is important because there're 5 years of an earnout component to the transaction, therefore breaching the APA would have financial consequences. What about if I want to share my APA with a lawyer (not who drafted it) to discuss such lawsuit? Thanks in advance
A: It is not likely that the agreement could be interpreted to prohibit you from sharing the terms with an attorney under such circumstances; and the fact that you do so would probably be confidential in any case. Run your dilemma by an attorney with experience in such matters to determine, first, if the terms of the agreement should be shared with an attorney. Then, with advice from the attorney, find a broker/consultant.
A: If the confidentiality clause in your asset purchase agreement does not contain any exceptions for professionals who have a need-to-know the confidential information, or other like language, then sharing the confidential information with your business broker is not advisable as that would be deemed a breach. Typically, confidentiality clauses in asset purchase agreements carve out exceptions for parties who have a need to know the information but not all contracts are the same. I recommend re-reviewing your agreement for any such language. As for sharing the information with a lawyer for legal advice, that's fine. I'm not aware of a single case over the course of my 18 years of legal practice where a court held a confidentiality clause was breached because the party shared information with their attorney. In closing, given the issue at hand and the 5 year earn out that is at stake, it would behoove you to engage an attorney to review the agreement and advise you accordingly to achieve your objectives and protect your interests.
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