How to Share Proprietary Code and Technical Documents with a Potential Acquirer—Without Losing Your Trade Secrets

For founders and CEOs of software companies, few moments are as strategically delicate as sharing proprietary source code and technical documentation with a potential acquirer. On one hand, transparency is essential to move a deal forward. On the other, premature disclosure of trade secrets can expose your company to significant risk—especially if the deal ultimately falls through.

This article outlines a practical, risk-mitigated approach to sharing sensitive technical assets during M&A due diligence. Whether you’re fielding interest from a strategic buyer or preparing for a formal process with a firm like iMerge Advisors, these steps can help you protect your intellectual property while maintaining deal momentum.

Why This Matters: The Asymmetry of Disclosure

In most M&A conversations, the seller bears the burden of disclosure. Buyers want to validate claims about product architecture, scalability, and IP ownership. But if the deal doesn’t close, the seller walks away having revealed their crown jewels—while the buyer walks away with insights that could benefit a competing product or investment.

This asymmetry is particularly acute in software and SaaS transactions, where the value of the business is often tied directly to proprietary codebases, algorithms, and technical know-how. As we’ve seen in numerous transactions at iMerge, the key is to structure access in a way that builds buyer confidence without compromising your long-term defensibility.

1. Use a Tiered Disclosure Strategy

Not all information needs to be shared at once. A well-structured M&A process staggers disclosure based on deal progression:

• Pre-LOI (Letter of Intent): Share high-level architecture diagrams, product roadmaps, and summaries of IP ownership. Avoid sharing actual source code or detailed technical documentation.
• Post-LOI, Pre-Diligence: Once exclusivity is granted, provide more detailed documentation—such as API specifications, system design documents, and security protocols—under strict confidentiality terms.
• Late-Stage Diligence: Only at this stage should you consider granting access to source code, and even then, under tightly controlled conditions (see below).

This phased approach aligns with best practices we’ve outlined in Completing Due Diligence Before the LOI, and helps ensure that sensitive materials are only shared when the buyer has demonstrated serious intent.

2. Strengthen Your NDA—And Go Beyond It

While a Non-Disclosure Agreement (NDA) is standard, not all NDAs are created equal. Work with experienced M&A counsel to ensure your NDA includes:

• Specific definitions of “Confidential Information” that include source code, algorithms, and technical documentation.
• Use restrictions that prohibit reverse engineering, derivative works, or use of the information for competitive purposes.
• Survival clauses that extend confidentiality obligations beyond the termination of discussions.
• Injunctive relief provisions that allow you to seek immediate legal remedy in case of breach.

However, legal protections alone are not enough. As we often advise clients during exit planning strategy sessions, enforceability can be difficult and expensive. That’s why technical safeguards are equally important.

3. Use a Secure, Monitored Code Review Environment

When it comes time to share source code, never send it via email or allow it to be downloaded. Instead, use a secure, read-only code review environment. Options include:

• Virtual Data Rooms (VDRs): Platforms like Intralinks or Firmex can host encrypted documents with granular access controls.
• Code Escrow Services: Services like Iron Mountain or EscrowTech can hold source code in escrow, releasing it only upon deal close or under specific conditions.
• On-site or virtual code review sessions: Allow the buyer’s technical team to review code in a controlled environment (e.g., via screen share or on a dedicated machine) without the ability to copy or export files.

Some sellers even watermark code snippets or use monitoring software to track access and activity. These measures may seem extreme, but in high-stakes deals—especially those involving AI models or proprietary algorithms—they’re increasingly common.

4. Limit Access to Need-to-Know Personnel

Insist that only essential members of the buyer’s diligence team—typically their CTO, lead engineer, or outside technical advisor—have access to sensitive materials. Require the buyer to provide a list of individuals who will review the code, and include this list in your NDA or data room access agreement.

In one recent transaction facilitated by iMerge, a SaaS company limited code access to just two individuals on the buyer’s side, both of whom were required to sign personal confidentiality acknowledgments. This level of control helped the seller feel confident in proceeding with diligence, even though the deal ultimately did not close.

5. Consider Code Obfuscation or Partial Disclosure

In some cases, it may be appropriate to share only portions of the codebase—such as modules related to core functionality or integration points—while withholding more sensitive components. Alternatively, you can provide obfuscated versions of the code that demonstrate structure and logic without revealing proprietary algorithms.

This approach is particularly useful when dealing with strategic buyers who may operate in adjacent markets. It allows them to assess code quality and architecture without gaining access to trade secrets that could be repurposed.

6. Prepare for IP Ownership Questions

Buyers will scrutinize your IP chain of title. Be ready to demonstrate that all code was developed in-house or under valid work-for-hire agreements, and that no open-source components are used in ways that could trigger license contamination (e.g., GPL).

As we’ve noted in our Due Diligence Checklist for Software (SaaS) Companies, clean IP documentation is one of the most overlooked—but critical—elements of a successful exit.

7. Have a Contingency Plan if the Deal Falls Through

Even with all precautions, there’s always residual risk. That’s why it’s important to:

• Track exactly what was shared, when, and with whom.
• Revoke access to data rooms and code environments immediately if the deal terminates.
• Monitor the buyer’s product roadmap and public releases for signs of IP misuse.
• Be prepared to enforce your NDA if necessary—but recognize that prevention is far more effective than litigation.

Final Thoughts

Sharing proprietary code and technical documentation is a necessary step in most software M&A transactions—but it doesn’t have to mean giving away your trade secrets. With the right legal, technical, and procedural safeguards, you can strike a balance between transparency and protection.

Firms like iMerge specialize in helping software founders navigate these complexities, from structuring secure diligence processes to negotiating favorable deal terms. Whether you’re preparing for a strategic exit or fielding inbound interest, a thoughtful approach to IP disclosure can make or break your outcome.

Founders navigating valuation or deal structuring decisions can benefit from iMerge’s experience in software and tech exits — reach out for guidance tailored to your situation.