In Delaware, Privilege Goes to the Buyer -- Court Finds Buyer Controls Attorney-Client Privilege over Seller’s Pre-Closing Communications Regarding Merger Negotiations, Unless Otherwise Agreed

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The Delaware court of chancery held recently that control over a target company’s attorney-client privileged communications, including communications between the target company’s counsel and its pre-merger stockholders, passes to the acquiror upon the closing of the merger. Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP (Del. Ch. Nov. 15, 2013). As a result, the former stockholders of an acquired company were barred from asserting the attorney-client privilege over merger-related communications with the company’s legal counsel that the buyer discovered on the company’s computer systems after the closing of the merger.

The court noted, however, that the parties could have provided for a different result by contract through an appropriate provision in the merger agreement or other agreement.

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