Disclosure conundrum

In the world of M&A, confidentiality/non-use agreements really matter.  If you’re the seller, you want to prevent a potential buyer from seeing and using all your super-secret stuff if the deal doesn’t close.  If you’re the potential buyer, you want to reserve the right to bail out if you don’t like what you see, and not have to worry that the potential seller (or someone else, like the SEC) will claim that some decision you make later, independently of the seller’s information, was, in fact, a violation of the confidentiality/non-use agreement.  One solution was “contamination teams,” groups of retired employees of the potential buyer who look at the information and advise buyer whether to go ahead or not.  If the deal doesn’t close, the contamination team is excluded from further involvement in buyer’s business.

Now the problem has evolved (as they often do). Creditors who have had access to a target’s confidential information as part of discussions of an unsuccessful potential workout now want the company to disclose all that information to the market, so that the creditor can continue to trade in the target’s shares without having to worry about allegations of insider trading.

What’s a target to do?  Refuse to release the creditors from their confidentiality/non-use agreement? Limit what the creditors see?

“Creditors Ask for Disclosure,” Wall Street Journal, January 6, 2014 http://on.wsj.com/KtRZzN

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Filed under Business Case, Controls, Information, Operations, Ownership, Risk, Third parties, Use, Value

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