Market Standards: Trends in Sandbagging Provisions

“Sandbagging” refers to when a buyer makes a post-closing indemnification claim for breaches or inaccuracies of the seller's representations, warranties, or other obligations, even though the buyer knew of the breach prior to closing. Parties can choose to explicitly include a “pro-sandbagging” or “anti-sandbagging” provision, or, as a middle ground, remain silent on sandbagging in the transaction documents.

In a survey of 162 private target transactions filed between January 1, 2023 and March 31, 2023:

• 39 agreements (24%) contained pro-sandbagging provisions
• 9 agreements (6%) contained anti-sandbagging provisions
• 114 agreements (70%) were silent on sandbagging

This indicates a trend toward silence in definitive agreements, with a 6% decrease in pro-sandbagging provisions, 2% decrease in anti-sandbagging provisions, and an 8% increase in silent agreements in comparison to the same period in 2022.

Market Standards is a powerful tool for researching and comparing over 38,000 M&A transactions from 2008 to the present. Leverage Market Standards to find on-point precedent language on the most highly negotiated transactions with over 150+ M&A deal points. To learn more about how it can help M&A attorneys work more efficiently, click here.

Discover Emerging Trends in M&A Transactions

Related Content

• Sandbagging Clauses
  Get pro-sandbagging and anti-sandbagging clause language, analysis of the pros and cons, guidance on buyer and seller positions, as well as case law interpreting agreements that are silent on sandbagging.

• Silence on Sandbagging in Private Acquisitions Chart (CA, DE, NY, TX)
  Review the default approach to sandbagging when the acquisition is silent, in four key jurisdictions, along with case law citations and analysis.

• Indemnification Provisions in Private Acquisition Agreements
  Learn the buyer and seller considerations for buyer indemnification claims as well as third-party claims.

• Representations and Warranties in Acquisition Agreements
  Analyze the typical representations and warranties found in an acquisition agreement and considerations for drafting and negotiating these provisions.

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