Big Story

Protecting Attorney-Client Privilege When Selling Your Business

Key Takeaways

• When you sell your business, the buyer may gain control of confidential communications between the company and its lawyers, including legal advice about the sale.

• Seyfarth’s 2026 Middle Market M&A survey analyzed more than 160 private-target acquisition agreements. In 76% of surveyed deals, the agreement provided for the seller to retain attorney-client privilege after closing.

• Before closing, sellers should make sure the purchase agreement states who will control confidential communications with the company’s lawyers after the sale.

When an owner sells a business, they naturally focus on the sale price, the funds received at closing, and any obligations that continue afterward. A key consideration is how the company’s privileged communications with its lawyers are handled, as this can affect the seller’s ability to defend against claims or respond to disputes after the transaction.

The issue is particularly important when the company’s lawyers have advised on both its operations and the sale. The legal client may have been the company itself, and once ownership changes, the seller cannot automatically assume that every communication with company counsel remains under the seller’s control.

Seyfarth’s 2026 Middle Market M&A Survey reviewed more than 160 agreements to acquire privately held businesses. In 76% of those deals, the agreement stated that the seller would retain attorney-client privilege after closing. The share varies each year. Seyfarth’s previous survey reviewed more than 150 agreements signed in 2024 and the first half of 2025. It found that 80% provided for sellers to retain the privilege after closing, up from 74% the year before.

Who controls these communications after a sale depends on the deal structure, applicable law, and purchase agreement. In Great Hill Equity Partners v. SIG Growth Equity Fund (2013), Delaware’s Court of Chancery ruled that the company’s attorney-client privilege passed to the surviving corporation, including privilege over advice about the merger. In that case, the sellers had not negotiated a clause reserving it for themselves.

In Shareholder Representative Services v. RSI Holdco (2019), the sellers had negotiated that protection. The merger agreement preserved privilege over legal advice connected to the transaction, gave the sellers’ representative control, and prohibited the buyer from using covered communications against the sellers after closing. When a dispute arose over money withheld from the purchase price, the buyer sought to use roughly 1,200 pre-merger emails left on company computers and servers. The court enforced the clause and blocked their use. 

A general confidentiality clause may not allow sellers to control communications with the company’s lawyers. Confidentiality limits disclosure. Attorney-client privilege protects certain legal communications from compelled disclosure. The purchase agreement should state who controls that privilege after closing, which communications it covers, and how those records will be handled, including legal advice about the sale.

Those records may be in company email accounts, shared drives, or legal folders that pass to the buyer. Before closing, sellers and their lawyers should identify the covered records and agree on which will be removed, kept separately, or left in company systems with restrictions on the buyer’s access and use.

These communications can become important if a dispute arises after the sale.

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Governance Feed

1. Small-business Subchapter V bankruptcy elections reached 2,442 from January through September, up 46% from 1,672 a year earlier. September recorded 276 elections, up 38%, even as commercial Chapter 11 filings fell 16% that month. Congress has passed H.R. 7730 to raise the Subchapter V debt limit from roughly $3.4 million to $7.5 million, expanding access to the small-business restructuring process. 
   

2. Most Fed officials expected another interest-rate increase before year-end, according to newly released meeting minutes. Markets priced in an 84% chance of a December hike, while anticipating no change at the October meeting. A quarter-point increase would lift the prime rate to 7.25%, raising interest costs and monthly payments on variable-rate SBA acquisition loans. 

3. Yale researchers Mark Agnew and A. J. Wasserstein surveyed 83 searchers launching in 2026. Respondents put their average chance of closing an acquisition at 78%, although only 43% had prior M&A experience. Running a business was the leading motivation at 36%, followed by independence at 24%. Eight further quarterly surveys will track how their confidence and expectations change over two years of searching.

Thesis Principle

A business sale does not automatically transfer the licenses and permits needed to operate it. If a professional license belongs to the owner, the buyer may need a qualified license holder in place before taking over. Business license requirements vary by state, and a change in ownership may require a new application. Environmental permits and FDA or DEA registrations may also require filings or agency approval.

Resources & Events

📅 Business Owner Roundtable (Englewood, CO - November 10, 2026)

Exitology will host a full-day workshop for business owners focused on building company value and preparing for a future transition. The program covers five stages of value maturity: identifying, protecting, building, harvesting, and managing value. Owners will work through a business value assessment and develop a prioritized 90-day action plan. The roundtable is designed for owners who want to strengthen their businesses and preserve their exit options, even if a sale is not imminent.

📅 ISF Deal Series (Los Angeles, CA - November 17, 2026)

The Independent Sponsor Forum, in partnership with the Small Business Investor Alliance, will bring vetted independent sponsors and capital providers together at the Hilton LAX for a day of one-to-one meetings, deal discussions, and networking. The agenda includes conversations on independent sponsor partnerships, board governance, deal structuring, capital raising, and non-control capital models. Attendance is by invitation and is limited to qualified independent sponsors and capital providers, including family offices, SBICs, private equity firms, and private credit investors.

📊 Report Spotlight: PwC’s 2026 M&A Integration Survey (PwC)

PwC’s 2026 M&A Integration Survey, based on 530 executives and senior dealmakers, finds that only about one in three acquirers fully achieve their deal thesis objectives. While 59% of successful acquirers fully translated value drivers into executable initiatives before integration, just 28% of limited-success acquirers did the same. 62% of successful acquirers were very confident their reported synergies were auditable, compared with 27% of limited-success acquirers. Read →

For the Commute

Rejected at 4x, Sold for 8 Figures (Built to Sell Radio)

In this episode, Taradel founder Jim Fitzgerald discusses how his first attempt to sell his $30 million direct-mail business resulted in five offers at roughly 4x EBITDA, well below his expectations. After shifting his focus from growth to profitability and building a leadership team that could operate without him, Fitzgerald returned to the market and secured a low eight-figure, all-cash sale in December 2024. For owners preparing for an eventual exit, the takeaway is that revenue growth alone doesn't determine a business's value. Sustainable profitability and operational independence can make a company significantly more attractive to buyers.