Over the past several years, we’ve blogged quite a bit about privilege issues relating to M&A. Topics have ranged from who owns the privilege post-closing to the viability of assertions of a joint defense privilege between buyers and sellers. But this SRS/Acquiom memo covers a related issue that we haven’t addressed directly – M&A conflict waivers.
Waivers are an important topic, because without them, the ability of the seller’s lawyer to represent its shareholders in post-closing disputes can be murky at best. This excerpt explains:
Regarding the conflicts waiver issue, whether the seller’s law firm can continue after closing to represent the selling shareholders or the shareholder representative is not always clear. The law firm’s client is usually the selling company, not its shareholders. At closing, the company that was acquired becomes a part of the buyer, and therefore, the attorney-client relationship arguably flows to the buyer. This means that the selling company’s counsel may be conflicted out of taking a position that is contrary to the interests of the combined company, as this combined company now includes its current or former client.
The memo recommends confronting this issue head-on by having the seller negotiate for a waiver of the conflict to be included in the merger agreement itself, and includes a sample waiver provision.
– John Jenkins