How it works in a data room
Privileged material, such as legal advice on pending litigation or regulatory exposure, needs careful handling in diligence. Sellers usually keep it out of the main room, provide summaries instead, or share it only with the buyer’s outside counsel under a common interest arrangement. A restricted folder with view-only access, limited to named lawyers, reduces the risk that privilege is lost by disclosure. Permission records and logs show exactly who received access, which can matter if privilege is challenged later. A legal hold may apply to the same documents.
Why it matters in a deal
Sharing privileged advice with a counterparty can waive the protection, meaning the documents could later be demanded in a dispute. The rules differ by jurisdiction: US courts recognize a common interest doctrine in some deal contexts but apply it inconsistently, and English law uses the terms legal advice privilege and litigation privilege with its own tests. Buyers still need to understand litigation risk during legal due diligence, so the parties look for ways to inform without waiving. This is general information only; seek advice from counsel.
Example
A US medical device company under investigation by a regulator is being acquired. Its counsel prepares a factual summary of the investigation for the room, and shares the underlying privileged memos only with the buyer’s outside law firm in a separate folder, under a written common interest agreement. Our United States guide covers related regulatory context.