What Is the Confidentiality Bubble In M&A?


The term “confidentiality bubble” is used to refer to arrangements that restrict the flow of information within and between corporations to protect the short-term and long-term goals and interests of the corporations. The word “bubble” in the phrase is especially befitting in the case of merger and acquisition deals – sensitive situations and processes that are, like bubbles, especially fragile, vulnerable, affected by tensions from the inside and the outside and with a high potential for bursting.

Whether two companies join forces in the form of a merger and establish a new corporate entity or the transaction takes the form of a friendly or hostile acquisition, if you want to know how to sell your company, be aware that the process will involve numerous non-disclosure agreements, contracts, letters of intent, due diligence agreements and lots of other documents that contain confidential information pertaining to the involvement of the two parties. Any disclosure of what is contained in those documents can have catastrophic consequences for the new entity formed as the result of the merger or for the future of the acquisition deal. This also means that the creation of the bubble is essential for the success of M&A, but a reasonable balance must be found between keeping everything a secret and providing employees the information they need for being able to stay confident regarding their future at the company they are employed with.

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