M&A Boot Camp booklet 2023 - Flipbook - Page 82
Other Limitations on Indemnification
Effect of buyer’s knowledge on indemnification rights –
“Sandbagging”/“Anti-Sandbagging”
Sellers’ mindset:
– “If the buyer becomes aware before closing of significant inaccuracies
in our representations, its remedy is to (1) ask the target to cure the
inaccuracies, (2) negotiate a reduction to the purchase price, or (3)
walk away from the transaction. If the buyer elects to waive its closing
condition related to the inaccuracies and closes the deal, then it is
unfair to then allow the buyer to use the indemnification provision as
a “back-door” way of obtaining a purchase price reduction that the
target might never have agreed to. If the buyer knows a
representation is inaccurate, the buyer should not be able to ‘sandbag’
us by closing and then suing us.”
Hogan Lovells US LLP
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