September 29, 2016

Privilege Issues in M&A: No Consensus Yet

This recent SRS Acquiom paper suggests that M&A lawyers are still sorting out the privilege issues raised by the Delaware Chancery Court’s 2013 decision in the Great Hill Equity Partners case – which held that the seller’s attorney-client privilege transferred to the buyer following the closing of a merger. According to the paper, here’s how dealmakers have addressed the decision in their merger agreements:

– One-third of the merger agreements surveyed don’t address the privilege issue at all.

– More than half of the remaining agreements assign the privilege to the target shareholders as a group, or to the shareholder group and their representative.

– One-third of the agreements that address privilege assign it to a single shareholder representative.

Assigning ownership and control of the privilege to a single representative avoids the potential for inadvertent waiver and uncertainties about who can assert the privilege.  The white paper also notes that approximately one-third of all of the agreements surveyed included language prohibiting the buyer from using privileged communications to assert claims against the target’s shareholders. We’ve calendared a webcast on this topic: “Privilege Issues in M&A.”

John Jenkins