I acquired an expired domain on 3/10/2014. I started hosting the domain using the provider for my existing domain on 3/16/2014. At that point, I stopped hosting my existing domain and started hosting the new one.
I had checked out the whois history of the domain before acquiring it and also the back-link profile. There was nothing alarming in what I found. I also had personal knowledge of the domain which is in the same business niche as I am. The domain also serves the same general location as my existing domain. The domain ranked in the top 10 for several important keywords in my business prior to my acquiring it up to approximately 3/21/2014. At this point, the site dropped from top 10 to between 50 and 60 for the same keywords. I have done nothing to change the existing back-links to the site. Looking in Google Webmaster Tools, I don't see any indication that the previous owner has removed any of these links. I have started the process of getting back-links to my existing domain to point to the acquired domain.
My question is: what has happened to cause the fall in rankings? Is there a 'sandbox' period when a domain changes ownership or the hosting provider changes? Does Google somehow devalue the existing back-links when a domain changes hands?