How to Maintain Attorney-Client Privilege in M&A Deal Teams: Key Tips and Considerations

June 27, 2024
Weavil Law

One of the things we often highlight at Sierra Pacific Partners is the importance of a cohesive deal team with open lines of communication. What could be wrong with that?

Loss of attorney-client privilege if you’re not careful.

  • Generally, attorney-client privilege is lost if the communication is made in the presence of a third party. So, if your banker, broker, or other financial advisor is on a call or email with your attorney, the privilege is lost UNLESS an exception applies.
  • Leading the way in recognizing the practicalities of deal teams and facilitating their work is, unsurprisingly, Delaware.
  • By statute, Delaware creates an exception to the general rule for communications that involve financial advisors where the person making the disclosure viewed it as confidential and there was an expectation of confidentiality, BUT the discussion must involve legal matters, not solely business or commercial ones.
  • New York and other states have much narrower exceptions.

So, what are some tips to maintain privilege?

  • Have your law firm retain the financial advisor (good advice, but often impractical).
  • Choose Delaware law in the transaction agreements.
  • Ensure that the financial advisor’s engagement letter states that the banker will assist the attorneys in providing legal advice at the nexus of legal and business matters.
  • Exclude bankers from sensitive legal discussions.
  • Be wary of including brokers or others acting for both the buyer and seller on sensitive communications, as that may call into question the expectation of confidentiality.

There are many more aspects to privilege in M&A, including information shared between the buyer and seller and who holds the privilege post-closing when the buyer succeeds to the seller’s interest.

The bottom line is to realize this is an issue, and a frequent one, and to consider who you’re including on that email.

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