The Value of Confidentiality

Nearly every M&A advisor would agree that confidentiality is the foundation upon which successful transactions are built. Confidentiality is paramount throughout the M&A transaction process, but this is especially true when it concerns:

  • the seller’s employees
  • the seller’s customers and vendors
  • the seller’s competitors and the public
  • public companies and the possibility of insider information

Middle Market business owners vary in their employee disclosure approach. Some choose to refrain from disclosing any information to employees; confiding only with trusted advisors. Whereas other owners may control the disclosure; dictating the dialogue with the intent of alleviating employee concerns.

A comprehensive nondisclosure and/or confidentiality agreement should be designed in a manner that prevents a seller’s business from being harmed by disclosing to outside parties the actual name of the company, the financial and business details of the company (typically outlined in the Confidentiality Information Memorandum), and especially, the “proprietary juice” that differentiates the company from its competitors.

Often downplayed as a formality of doing business, confidentiality should be addressed by buyers and sellers and their respective M&A teams early in the transaction process.