Key Takeaways
- • Attorney-client privilege protection in M&A transactions is not automatic and can be significantly limited or lost entirely if selling parties fail to address privilege ownership explicitly in definitive agreements, creating substantial legal and disclosure risk during post-closing disputes.
- • The "who and whose" framework—determining which party holds the attorney-client relationship and thus owns the privilege—is critical because courts have repeatedly cautioned that confidential pre-closing communications may inadvertently transfer to acquiring parties following transaction close, exposing sensitive strategic and legal advice.
- • Selling parties bear primary responsibility for protecting privilege in M&A contexts, as the sell-side law firm's client is typically the target company; without proper contractual safeguards addressing privilege ownership, these communications risk becoming discoverable by the buyer in subsequent litigation.
- • M&A participants commonly neglect privilege protection during transaction negotiations despite its material impact on post-closing liability exposure, treating it as a peripheral concern rather than a core deal structuring issue requiring detailed attention in purchase agreements.
Summary
Vorys, Sater's white paper addresses a critical but frequently overlooked issue in mergers and acquisitions: the ownership and protection of attorney-client privilege for pre-closing communications. The firm observes that parties engaged in M&A negotiations typically devote minimal attention to whether their confidential legal communications with counsel will remain protected after transaction closing, despite the significant legal and strategic implications of privilege loss.
The central concern centers on how courts have increasingly limited or eliminated attorney-client privilege protection in M&A transactions when parties fail to properly allocate privilege ownership in definitive agreements. Once a transaction closes, the acquiring company typically gains operational control and access to the target company's files, communications, and work product—including potentially privileged materials prepared by the target's counsel. Without explicit contractual provisions addressing privilege retention, these communications can become discoverable by the acquirer in subsequent litigation, fundamentally undermining their confidential status.
The framework Vorys outlines hinges on understanding the "who and whose" of the relationship: identifying which party is the actual client of record for the selling-side counsel. In most M&A transactions, the target company—not its shareholders or parent—is the formal client of the sell-side law firm. This distinction is critical because upon closing, the buyer assumes control of the target entity, and courts have ruled that privilege may not survive the change in control unless specifically protected by contract. Selling parties bear primary responsibility for establishing contractual safeguards that preserve privilege over pre-closing communications.
The white paper, authored by members of Vorys' M&A and Private Equity Groups, is directed at practitioners who need to understand how to structure deals to retain privilege protection. The firm, established in 1909 and ranked among the 200 largest U.S. law firms with nearly 375 attorneys across seven offices, positions this guidance as essential risk management for parties seeking to protect sensitive strategic, financial, and legal advice from post-closing discovery. The analysis underscores that privilege protection requires affirmative action during deal negotiation rather than passive reliance on default legal doctrines.
The central concern centers on how courts have increasingly limited or eliminated attorney-client privilege protection in M&A transactions when parties fail to properly allocate privilege ownership in definitive agreements. Once a transaction closes, the acquiring company typically gains operational control and access to the target company's files, communications, and work product—including potentially privileged materials prepared by the target's counsel. Without explicit contractual provisions addressing privilege retention, these communications can become discoverable by the acquirer in subsequent litigation, fundamentally undermining their confidential status.
The framework Vorys outlines hinges on understanding the "who and whose" of the relationship: identifying which party is the actual client of record for the selling-side counsel. In most M&A transactions, the target company—not its shareholders or parent—is the formal client of the sell-side law firm. This distinction is critical because upon closing, the buyer assumes control of the target entity, and courts have ruled that privilege may not survive the change in control unless specifically protected by contract. Selling parties bear primary responsibility for establishing contractual safeguards that preserve privilege over pre-closing communications.
The white paper, authored by members of Vorys' M&A and Private Equity Groups, is directed at practitioners who need to understand how to structure deals to retain privilege protection. The firm, established in 1909 and ranked among the 200 largest U.S. law firms with nearly 375 attorneys across seven offices, positions this guidance as essential risk management for parties seeking to protect sensitive strategic, financial, and legal advice from post-closing discovery. The analysis underscores that privilege protection requires affirmative action during deal negotiation rather than passive reliance on default legal doctrines.
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