A confederation is different from a client state/satrapy. AFAIK barbarian factions can't make other factions client states ect at all.

Confederation is only available if there of a similar clan type (same blood in their diplomacy screen) and the major influence on this is a foreign threat to that nation. Peacable one-settlement factions that you have great relations with won't join most of the time. Sometimes a major gift of gold will make them consider it, and that gold is lost, even though all the clans other posessions become yours (I figure their former faction leader retires to live like a king in Patagonia on his ill-gotten wealth). If an enemy nation of a different culture is at war with them, the chances go up a bit. If a nation of a different culture is actually invading their lands then the chances are much better. If they are close to losing it all then they will usually pay you handsomely to take over. In this instance I think (but cannot be certain) you don't have to be at war with their former aggressor, but they are even more likely to accept if you are, and more than once I've used it as a bargaining chip. The other way to make them accept is to park an army they know they can''t easily beat near their settlement and declare war. Twice I've fought and won a major victory against another celtic clan and then got them to join (and pay me for the privelage) immediately after, as they see their doom at hand.

When they do accept all current settlements, fleets and armies immediately transfer to your ownership I've never gained any money other than that done as part of the deal to join your confederation. If this would put you over the army cap the generals of the smallest armies will retire with the proper message, just like if you retired one of your own generals. At first these new generals won't show up on your faction screen, and I'm not sure if thats a bug or not, because I've had them show up later once they started earning some prestige. I assume it just takes a year for it to process the new members, but am not certain. I've never had agents transfer, but I'm always at or above the agent cap, so this could be the reason behind half a dozen 'retired' messages. This is interesting as the agent cap allows you to tempt people and go over it, but seemingly not buy nations and go over it.

The old faction ceases to exist at all, and will not come back except through 'liberate city' or rebellions. The first time you do this your faction is re-named (I became the Gaelic Confederation, a name that sucks) but otherwise no difference. As this can only happen to 'same blood' clans AFAIK you cannot get units or buildings you can't build out of it at all.

I think thats it.