That’s Not the Way We Do It Here: Reconciling Sandbagging Provisions for Multinational Buyers

Abstract

Although any number of provisions in an M&A purchase agreement can, and are, negotiated with a wide range of individual outcomes, there is often an overarching set of market norms silently operating as guardrails for the parties. These guideposts help to narrow the conversation and, in the absence of clear deal drivers, find an acceptable allocation of risk between the parties. But what happens when what is “market” in one geography varies dramatically from established practices in another jurisdiction? This tension makes it challenging to find the platform for consensus and can create an instinctive pull to dig into entrenched positions and resist equitable solutions. Moreover, when a counterparty challenges a familiar, domestic, standard, counsel can struggle to reset -- to see the rationale for the other position or appreciate the need to articulate the logic for his or her own view. In this article, we explore and combat this tendency in the context of one common private company M&A provision: the sandbagging or knowledge savings clause.