[true_religion]

I'm having trouble following... how were they ripped off?

There's some confusion about the NDA, but as far as I can see... The Company didn't disclose to anyone.

It broke down in due diligence which could just mean that The Company looked at their financials, and found that they were a lot weaker than first presumed and thus not a good acquisition. I'm not sure they admitted that they weren't profitable (who does really?), so it might have been presumed that if you have X products, and Y infrastructure then you must have Z sales behind it. When they looked at the financials, they didn't see the sales figure they wanted so bailed.

[karamazov]

NDA's are normally written not only to prevent disclosure, but also to prevent the company receiving the information from using it to copy your product. If you're disclosing to a potential competitor, you don't want them sharing that information with anyone else, but you especially don't want them just stealing your codebase and using it themselves.

[dmethvin]

I went through this very same left-at-the-altar scenario a decade ago with a startup. It can be very difficult to prove that the company used the NDA information they had in their possession. Clearly the tech staff in the big company saw it, since this seems to be how they made the determination that they could do it in-house for less.

[kgo]

Megacorp decides to purchase KFC.

As part of due diligence, they want to know what the secret recipe is. After all, you'd hate to find out one of the special herbs and spices is cocaine or arsenic. This is fine because MegaCorp signed an NDA.

MegaCorp breaks off the deal. Their chefs decide that they can make their own chicken. After all it's not hard to combine these nine herbs and spices.

The chefs only have this knowledge because you revealed your trade secrets under the protection of an NDA. They're not white box reverse engineering the recipe.