By Robbert van Os
Posted on 2023-03-20T00:00:00.000Z

Overcoming Legal Roadblocks, and Debunking 'Trade Secrets'

Explore the importance of trust, collaboration, and rational decision-making in business transactions, with insights from a tech consultant's experience.


As a tech consultant, I have had my fair share of unique experiences working with various clients, ranging from startups to established companies. One such experience involved a customer who approached me to conduct technical due diligence for a potential acquisition of a company under curatorship. This article chronicles the challenges I faced during this process, with the aim of highlighting the importance of trust, collaboration, and rational decision-making in business transactions, especially in the context of bankruptcy.

Navigating the NDA Maze

Before diving into the technical details of the target company, I first had to secure a Non-Disclosure Agreement (NDA) to protect the sensitive information involved. While signing NDAs is a standard practice in many assignments, it has become less common in recent years. In this particular case, securing the NDA proved to be a time-consuming process, for an understandable reason – the curator's concerns about protecting 'trade secrets' led them to provide only the bare minimum of information.

Despite my efforts to accommodate their concerns, the information provided was not substantial enough to establish trust in the NDA. This, in turn, raised concerns about the safety and confidentiality of the data being shared, further complicating the due diligence process.

The Entrepreneur's Plight

Filing for bankruptcy can be a harrowing experience for an entrepreneur. In such a situation, they lose complete control of their organization, and often find themselves at the mercy of legal representatives who might not fully comprehend the technology or domain in question. These lawyers, in their pursuit of protecting the assets, may inadvertently create roadblocks by withholding crucial information or overemphasizing the concept of 'trade secrets.'

Building Trust in Business Relationships

In the scenario I encountered, the lack of trust and transparency had the potential to drive my customer away from the deal. It's crucial to understand that any acquisition should be viewed as a long-term relationship, and without trust as its foundation, the partnership is likely to be fraught with challenges and misunderstandings.

Rational Decision-making: The Key to Success

To ensure a successful deal, decision-makers must prioritize rationality over emotions. It is essential to weigh the pros and cons of a transaction objectively, taking into account not only the financial implications but also the potential synergies, growth opportunities, and the overall compatibility between the involved parties.

The Importance of Transparency for the Selling Company

In situations where a company faces bankruptcy, the need for transparency becomes even more crucial. At this stage, the organization has little to lose, and maintaining secrecy can have negative consequences for any potential deals. However, it's essential to strike a balance between protecting sensitive information and being forthcoming. One might wonder why there's a need for a secure NDA if the selling company still hesitates to share crucial data, especially when the small risk of a consultant learning something new is at stake. In this case, the overall information shared turned out to be common knowledge or best practices, nothing truly special. It's vital for the selling company to be as open as possible, even after signing a stringent NDA, in order to facilitate a smooth transaction and avoid the pitfalls of excessive secrecy.

Benefits of Transparency

Attracting Interested Parties: When a bankrupt company is open and transparent about its operations, assets, and liabilities, it can more effectively attract potential buyers. This transparency signals that the company is serious about the sale and is willing to cooperate to ensure a successful transition.

  • Building Trust: By sharing information freely, the selling company can establish a solid foundation of trust with potential buyers. This trust is essential in forming long-term relationships, and it can greatly impact the buyer's perception of the company's worth and potential.

  • Expedited Due Diligence: A transparent approach allows for a quicker and more efficient due diligence process. When buyers have easy access to the necessary information, they can make informed decisions and move the transaction along more rapidly. This can be especially beneficial in a bankruptcy situation, where time may be of the essence.

  • Improved Valuation: Providing a clear picture of the company's assets, liabilities, and operations can lead to a more accurate valuation. This not only helps buyers in their decision-making process but can also result in a better outcome for the selling company, potentially maximizing the return on the sale.

  • Reducing Potential Deal Breakers: Secrecy can lead to suspicion and doubt, which may prompt potential buyers to walk away from a deal. By being open and transparent, the selling company can alleviate these concerns and reduce the likelihood of potential deal breakers.

Acknowledging the Seller's Perspective

It is important to recognize and respect the concerns of the selling company, particularly their apprehension about divulging sensitive information to competitors. In a situation where multiple parties are interested in placing a bid, the seller's fear of revealing proprietary knowledge or trade secrets is understandable.

However, a well-drafted NDA can address these concerns by outlining strict confidentiality clauses that protect the company's intellectual property and prevent competitors from misusing the information. By establishing a secure legal framework, the selling company can be more confident in sharing the necessary data while safeguarding its interests.

Ultimately, striking the right balance between transparency and confidentiality is crucial to facilitate a successful deal. Both buyers and sellers need to work together, guided by rational decision-making and trust, to navigate the complex process of business transactions.


In the context of bankruptcy, selling companies should recognize the importance of transparency and open communication. By disclosing as much information as possible and cooperating with potential buyers, these organizations can foster trust, streamline the due diligence process, and ultimately increase the chances of a successful transaction. Maintaining secrecy, on the other hand, may deter interested parties and hinder the possibility of a favorable outcome.