Avoiding A Big Seller’s Mistake In M&A

A recent case before the Delaware Court of Chancery concerned an acquisition after which the buyer sued the seller for fraudulent inducement. The buyer’s case was based in part on what it found in privileged communications between the seller’s shareholders and company lawyers. The shareholders failed in their attempt to have those communications ruled inadmissible. The Delaware court said the default rule is that privileged communications pass to the buyer, although it also said there is a way to override the default when writing up the deal. “Transactional lawyers,” say the authors of this client alert from McGuireWoods, “should remember the potentially disastrous default rule and how to avoid it.”