FREE online courses on Mergers & Acquisitions - Chapter 2 - Confidentiality

 

It is very important for both sides to keep things confidential before announcing the merger. If customers, suppliers, employees, shareholders, or other parties should find out about the merger before it is announced, the target company could lose a lot of value: Key personnel resign, productivity drops, customers switch to competing companies, suppliers decide not to renew contracts, etc. In an effort to prevent leaks, the two companies will enter into a Confidentiality Agreement whereby the acquiring firm agrees to keep information learned about the Target Company as confidential. Specifically, the Confidentiality Agreement will require the acquiring firm to:

 

• Not contact customers, suppliers, owners, employees, and other parties associated with the Target Company.
• Not divulge any information about the target's operating and financial plans or its current conditions.
• Not reproduce and distribute information to outside parties.
• Not use the information for anything outside the scope of evaluating the proposed merger.