May 01, 2018
Partner Cornell Wright has told Lexpert the mergers and acquisitions strategy sandbagging is receiving additional attention as parties on both sides of the transaction look to “stave off litigation.”
The article—which also appears on page 16 of the May 2018 print edition of Lexpert—speak to the strategy of sandbagging, which it defines as “situations in which a buyer may agree to a transaction despite knowing that one or more of the claims made by the seller is false, with the intention of potentially suing for damages once the deal has closed.”
The article explores the notion that sandbagging is integral to M&A as it assist both parties get a clearer view of potential points of concerns in the deal. It says “market participants concerned that sandbagging may become an issue typically protect themselves by including pro- or anti-sandbagging clauses in the agreement.”
Cornell tells Lexpert that bringing up sandbagging “forces players to hone in quickly on key aspects” of the deal and depending on the language used, it can shine a light on the other side party.
“If someone puts in a pro-sandbagging provision, it really does focus the seller’s attention—what are you, the purchaser, thinking might become an issue?” he told Lexpert.
“So even before you sign the agreement, that will focus everybody’s attention on the rep and warranty itself because parties will want to get to the bottom of what the other party thinks might be an issue.”
You can read all of Cornell’s thoughts on the issue in the full article in Lexpert.
You can learn more about Torys’ M&A work by heading to its practice page.