In most mergers, the buyer and seller are each represented by legal counsel. The stockholders of the target company often assume that communications with the law firm that “sat on their side of the table” in the negotiation phase of the transaction will continue to be confidential and unavailable to the buyer since the buyer was the adverse party during the negotiation phase. This analysis, however, fails to take into account the actual nature of the attorney-client relationship. In most deals, the sell-side law firm’s client is the target company, not its stockholders. At closing, the target company typically becomes a wholly owned subsidiary of the buyer. Therefore, there has been some question as to whether rights to the legal privilege and the attorney-client relationship flow to the buyer with respect to pre-closing communications.
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