[dshah]

Although this scenario is very common, it's not common for the story to get shared. Thanks to the entrepreneur that shared it.

One of the reasons that folks don't share their horror stories around M&A is that often, in the back of their minds, they're still hoping that it was all just a big misunderstanding (wishful thinking). They're often also worried about creating a negative impression around the company -- thereby potentially jeopardizing deals with others in the future.

In cases with truly bad faith, the "acquirer" can actually exploit these two things.

[pg]

They get shared among YC alumni, and acquirers know that, which seems to mitigate the worst abuses.

[larrys]

"which seems to mitigate the worst abuses"

Why is it an abuse? It's business. Somebody can sugar coat and treat someone nicely (not be a dick) but in the end they are going to do what is in their best interest. Everyone does this. (I'm not claiming that some people aren't manipulative or more of an asshole than others.)

[KaeseEs]

If you have to ask why violating an NDA and lying in the context of a financial transaction (aka "fraud") are abuses, no one will ever be able to explain it to you.

[larrys]

Sorry I didn't just fall off the turnip truck as you imply.

From the story:

"but given our waning cash reserves we felt like putting our eggs in this basket and creating a trusting relationship would increase the likelihood the deal would happen"

Naive. They took a chance and bet wrong. If you've been doing business long enough you would realize that a trusting relationship will not trump self interest. And any legal document doesn't mean anything if you don't have the resources to enforce it if the other side wants to get out of it.

"We are a company without the cash to try to enforce the NDA, and The Company knows it since they saw our financials during due diligence."

So they knew they didn't have enough money to enforce the agreement and they knew the acquirer knew that but yet they thought that it wouldn't be possible to have that used against them? That's naive as well.

Additionlly, everyone is assuming that they did steal info and that is a proven fact. It is not a fact. As of the writing of the story nothing has been built and there is no violation. We don't know if the company that "screwed them" ever did anything at all or if there was any abuse. Even if this went to trial (assuming funds were available) there isn't enough info in the story to even begin to make a judgment on who is right here and who is wrong. Companies always have disagreements and things get drawn out legally because each side thinks it is right. Nobody is looking to throw money out the window on clear cut legal cases. Two sides always see things differently.

When you say "violating an NDA" the NDA has not been violated. We have one side of a story. Given the facts this could be abuse or maybe not.

[bproper]

Kudos to the entrepreneur, but of course it would be more interesting and informative if the company was not anonymous, with no mention of the details around their business or the potential buyer.