Practical Takeaways When Negotiating Sandbagging Provisions In Canadian Private M&A Transactions

M&A lawyers carefully negotiate representations (reps) and warranties in M&A agreements. In many agreements, if the reps and warranties are not materially accurate at closing, the buyer is not obliged to close the transaction. And, if a buyer in the private M&A context discovers after closing that a rep and warranty is inaccurate, the buyer can typically seek recourse against the seller by either making an indemnity claim (which often involves dipping into a holdback or escrow of the purchase price), or suing the seller for damages. But can a buyer who knows (or ought to know) before closing that a rep and warranty is inaccurate still close and then seek indemnification and/or sue for damages?