M&A Foundations · glossary
A pricing mechanism in which accounts are drawn up as at the completion date and the price is then adjusted to reflect the cash, debt and working capital actually delivered. The buyer pays for what it really gets; the trade-off is months of post-completion accounting and, sometimes, disputes. The main alternative to a locked box. Chapter 9
Explained in Chapter 9, Price Mechanisms and Adjustments, of M&A Foundations.
Two items deserve special mention. The first is the price mechanism. It is not enough to record “€42,000,000”: a headline number means nothing until you know how it will be adjusted for what happens to the business between the accounts date and completion. There are two standard approaches. One is the locked box: a fixed price built on a historical balance sheet, protected by anti-leakage covenants. The other is completion accounts: a price trued-up against a balance sheet…Read Chapter 6, Term Sheets and Heads of Terms →
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Every chapter of M&A Foundations is free to read, including the full training share purchase agreement. It is part of one complete fictional deal, with every document attached and a test after every chapter. Open M&A Foundations → · All terms A–Z →