Why the NDA Took Three Weeks Before Any Documents Moved

The situation

Ayesha and her business partner had spent nine years building a non-emergency medical transport company in Kitchener, driving patients to dialysis appointments, rehabilitation clinics, and hospital discharges on contracts with local care providers. Their biggest competitor for those same contracts was a company founded by Sana, who had built her business the same way, one contract at a time, with a fleet of drivers and dispatchers doing similar work a few kilometres away.

Both companies had grown about as far as they could on their own. Regional health authorities were beginning to favour larger transport providers who could guarantee coverage across a wider area, and neither company alone had the fleet size to compete for the biggest upcoming contracts. Ayesha and Sana had known each other professionally for years, mostly as rivals bidding against each other, and over a coffee meeting they raised an idea neither had taken seriously before: what if, instead of competing for the same shrinking pool of contracts, they merged.

The combined company would have been worth roughly $11 million based on their early estimates of fleet value, contract backlog, and recurring revenue. Both sides wanted to move quickly. Sana's outside advisor, a business broker named Kasia who had helped structure a few similar deals, sent over a one-page confidentiality agreement and suggested both companies open their books the following week so everyone could start evaluating the numbers.

The problem

Ayesha brought the draft to Treadstone Law before signing it, and our team flagged the same issue that comes up in almost every merger between direct competitors: a generic non-disclosure agreement, the contract that restricts what a party can do with confidential information it receives, is built for a buyer looking at a target it does not compete with. It is not built for two companies that compete for the same contracts today and might still be competing for them tomorrow if the deal falls apart.

The broker's draft covered the basics — both sides agreed to keep shared information confidential and not to use it outside the deal. But it said nothing about what happened if the merger did not close. It did not distinguish between financial statements, which are relatively harmless to see and walk away from, and the two things that actually mattered here: each company's client list and its pricing on active contracts with regional health authorities.

If the merger fell apart after the data room opened — and a meaningful share of merger discussions between two operating businesses do fall apart, over valuation, control, or simply a change of heart — Ayesha's company and Sana's company would go back to being competitors for the same contracts. Except now, each would have seen exactly which care providers the other served, what rates it charged, and how its costs were structured. That information could be used to undercut the other's next bid, whether or not either side meant to. The generic NDA as drafted did nothing to prevent that.

There was a second problem, less visible but just as real. Employees on both sides, including administrative assistants who scheduled patient pickups and transit operators who drove the routes, would eventually need to know a merger was under discussion, or at least suspect it once site visits and fleet inspections began. Neither Ayesha nor Sana wanted staff finding out through a rumour before either owner had decided whether the deal was actually going ahead. The draft agreement said nothing about who could be told, and when.

What we did

1. Rewrote the NDA around information tiers, not a blanket promise. Rather than one confidentiality obligation covering everything, the agreement separated information into tiers. General financial statements and fleet inventories could be shared relatively early in due diligence, the process of each side verifying what the other actually owns and owes before a deal closes. Client-identifying information and contract pricing, the two categories that would cause the most damage if the deal collapsed, were held back for a later stage and only released once both sides had signed a term sheet, a document setting out the agreed structure and price subject to final contracts.
2. Built in a residual-use restriction with teeth. The agreement specified that if the merger did not proceed, neither company could use or rely on the other's client and pricing information when bidding on contracts for a defined period afterward. This is the clause that actually protects a competitor-to-competitor deal: it does not just say the information is confidential, it says what happens to the parties' competitive behaviour if the deal does not happen.
3. Added a clean-team protocol for the most sensitive material. For the client list and pricing data, the NDA named a small number of specific individuals on each side, not the whole ownership or management team, who were permitted to view that information, along with a requirement that it never leave that group without written consent. This let both companies verify the numbers mattered before exposing them broadly.
4. Set a disclosure timeline for employees separate from the NDA itself. The agreement fixed the point in the process — after a signed term sheet, before final due diligence on fleet and staffing — at which each company could begin informing its own employees that a merger was under discussion. This did not bind either owner to a particular outcome, but it gave both a shared, agreed moment rather than leaving it to guesswork or a leak.
5. Reviewed the data room structure before it opened. Once the NDA was signed, our team confirmed that the data room, the secure repository where due diligence documents are shared, was actually organized to match the tiers in the agreement, so that client and pricing files were not accidentally visible to reviewers who were not on the approved list.

The outcome

The revised NDA took about three weeks to negotiate, longer than either owner expected for what looked at the outset like a formality. Kasia, representing Sana's side, pushed back initially on the tiered structure, arguing it would slow due diligence. It did add a stage, but not much delay in practice: general financial and operational review proceeded on schedule, and the sensitive client and pricing data was released only once both sides had a term sheet in hand and a real reason to believe the deal would close.

The merger did close, roughly five months after the first coffee meeting, at a valuation close to the two owners' early estimate of $11 million. The combined company was awarded a regional transport contract within the year that neither company could have won alone. Ayesha's assessment afterward was that the NDA delay had been worth it regardless of how the deal turned out — because the version they signed protected both companies whether or not the merger succeeded, and the version Kasia first proposed only protected them if it did.

Because the deal closed, the residual-use restriction never had to be tested. But its presence in the agreement changed how freely both sides were willing to share information during due diligence. Ayesha later said that knowing the pricing data was walled off until a term sheet was signed made it easier to agree to open the books at all — she was not handing a rival everything and hoping for the best.

What you can learn from this