This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
Imagine a sale where, eight months after closing, the buyer sues the former owners for fraud — the classic post-closing fight about what the financials showed and who knew what. Discovery opens, and the sellers’ litigation counsel asks for the target company’s pre-closing emails with its deal lawyers, assuming they are privileged and protected. The buyer’s counsel responds with something worse than an objection: we already have them. They came with the servers. And under the controlling case law, we own the privilege that used to protect them — including the emails about how to negotiate against us.
Great Hill said the quiet part: the buyer bought the privilege
That is not a hypothetical risk profile; it is the fact pattern of Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155 (Del. Ch. 2013). A private equity buyer acquired Plimus by merger, later sued the former shareholders for fraudulent inducement, and — a year after closing — found communications between Plimus and its deal counsel sitting on the computer systems that had transferred in the merger. The sellers claimed the privilege stayed with them. Chancellor Strine disagreed. Section 259 of the Delaware General Corporation Law provides that after a merger, all property, rights, privileges, powers, and franchises of the constituent corporation become the property of the surviving corporation. The sellers argued “privileges” meant something narrower than the attorney-client privilege; the court held the statute means what it says — in the opinion’s words, “all means all” — and that the privilege over every category of pre-merger communication, expressly including the negotiations of the merger itself, passed to the surviving company the buyer controlled.
The opinion is candid about the escape routes the sellers did not take. New York’s highest court had reached a different result years earlier in Tekni-Plex, carving merger-negotiation communications out of the transferred privilege as a matter of policy — and Delaware practice knew about the issue, because deal lawyers had been writing articles urging carve-out provisions since Postorivo applied Tekni-Plex to a New York-law asset deal that expressly excluded deal communications from the transferred assets. The Great Hill sellers had negotiated no such provision, and had left the emails on the company systems for a year without asking for them back. The court’s advice to future sellers was explicit: use your contractual freedom. The default rule transfers everything; the exception has to be drafted.
The logic does not stop at mergers. The Supreme Court’s Weintraub principle — that control of a corporation’s privilege follows control of the corporation — means a straight stock sale delivers the same result through the boardroom rather than the merger statute: the new owners control the entity, and the entity’s management decides whether to assert or waive its privilege, including over communications the old owners thought of as theirs. Asset deals invert the default — excluded liabilities and excluded assets stay behind, which is why Postorivo came out the seller’s way — but only if the documents and the systems actually stay behind too.
There is also a fourth structure hiding in most middle-market deals: the LLC. The typical Florida target is not a Delaware corporation but a Florida or Delaware limited liability company, sold by membership-interest purchase or merged under the LLC acts. The statutory vesting language in LLC mergers does the same wholesale transfer work, and an interest sale hands the buyer control of the company — and with it, under the Weintraub logic, control of the company’s privilege. Nothing about the LLC form rescues an undrafted seller. If anything the exposure is worse, because founder-run LLCs are where the line between “the company’s lawyer” and “my lawyer” gets blurriest: the same counsel who papered the company’s leases often quarterbacks the owners’ exit, the engagement letter says the client is the company, and the resulting communications default to an entity privilege the buyer will own. Sellers who want advice that stays theirs need an engagement that says so — individual representation, billed to and directed by the sellers — before the candid emails get written, not after.
What Florida deal lawyers should take from a Delaware case
Great Hill construes a Delaware statute, but Florida’s merger provisions run on the same architecture: under the Florida Business Corporation Act, when a merger becomes effective the property, rights, and privileges of each constituent entity vest in the survivor, and chapter 605 does parallel work for LLC mergers. No Florida appellate court has squarely decided whether that vesting carries the attorney-client privilege over merger negotiations the way Section 259 does — so the honest planning assumption for a Florida deal is that it might, and that a seller relying on the absence of authority is volunteering to be the test case. The stakes are the same ones Delaware litigated: the post-closing disputes where these emails matter most are fraud claims, which Florida law refuses to let deal drafting quietly extinguish — the same current running through survival-clause fights and Florida’s non-reliance and economic-loss doctrine. If a fraud fight erupts, the single most useful evidence file is the seller side’s candid contemporaneous conversation with its own deal counsel. Great Hill decides who gets to read it.
The carve-out clause, and the email hygiene that backs it up
The drafting response is now standard in well-papered private deals, and it has four working parts, best stated in prose rather than boilerplate. First, the agreement designates the privilege over deal-related communications as belonging to the sellers or the sellers’ representative after closing — excluded from the transferred assets in an asset deal, expressly reserved notwithstanding the merger statute in a merger. Second, it consents in advance to the sellers’ deal counsel representing the sellers in post-closing disputes, cutting off the argument that the firm’s prior representation of the company disqualifies it. Third, it handles the documents themselves: the buyer agrees not to use or rely on seller-side privileged deal communications found on acquired systems, and to return or delete them — a claw-back for the ones that inevitably surface. Fourth, it aligns the no-waiver mechanics, so that whatever lands in the buyer’s hands does not waive privilege as to third parties.
But drafting only ratifies facts; it cannot manufacture them. The carve-out works when the communications were conducted in a way that lets the sellers keep them — and that is a hygiene question that starts at the letter of intent, in the same early window when the NDA and process discipline get set. Founders negotiating a sale should run deal communications through personal email or a separate workspace rather than the company’s systems the buyer will own, remember that the company’s Google Workspace admin after closing is the buyer, and understand the difference between the company’s lawyer and their own: where the interests of the founders and the company can diverge, individual counsel for the sellers — engaged as such — keeps the advice on the sellers’ side of the line. A seller who negotiates the whole deal from her company inbox, signs an agreement with no carve-out, and leaves the mailbox behind at closing has, without ever intending it, delivered her litigation file to her future adversary.
None of this is a reason to fear the sale process — it is a reason to respect the default rules. The privilege question costs a paragraph to solve at signing and a fortune to litigate afterward, which is about as favorable a trade as deal lawyering offers.
If you are negotiating a company sale and want the privilege carve-out and communications plan handled before signing, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
