In the Mergers and Acquisition Process
A confidentiality agreement is typically the first agreement entered into by the parties considering a potential merger or ac-
quisition. While seemingly straightforward, the issue of confidentiality is often critical to the success or failure of the transac-
tion. Both buyers and sellers have several key reasons to be concerned about confidentiality, including client/customer and
employee reactions, market intelligence, and competitors.
2010 continues to show signs that merger
and acquisition activity will increase, such as
increased confidence in private and public
sectors, companies with plenty with cash on
hand, and improving economic indicators. As
such, sellers in 2010 and 2011 can reasonably
expect that they will encounter an M&A market
with multiple targets looking to be acquired and
an increased number of buyers looking to pay
better multiples.
Wyatt Matas & Associates expects strategic
buyers (competitors or those in similar businesses as the seller) to be the most active buyers and be willing to pay bet-
ter valuations. Financial buyers are still reliant debt markets to finance much of the transactions, which have yet to work
themselves out. To this end, managing the vetting of the buyer, due diligence, and transaction process while maintaining
confidentiality will be very difficult and more important.
Given the challenges in protecting cofidentiality, companies should consider the following to help mitigate risk, manage
confidentiality, and ensure a smooth transaction process.
Confidentiality
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Mergers & Acquisitions
Second Quarter 2010
While a confidentiality agreement is typically the first
agreement to be entered into during a M&A transaction, the
importance of confidentiality starts when the seller decides to
pursue a sale.
The following are key points for confidentiality in the beginning
of the M&A process:
Limiting exposure early on is key.