M&A Foundations · glossary
A pricing mechanism that fixes the price from a past balance sheet, drawn up at the locked box date. The seller promises that no value has leaked out since, so the price is not adjusted after completion. Project Sunrise is a locked box deal. Chapter 9
Explained in Chapter 9, Price Mechanisms and Adjustments, of M&A Foundations.
Also explained in Legal Due Diligence.
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. The seller backs it with a promise that no value will pass out of the business to the seller before completion.…Read Chapter 6, Term Sheets and Heads of Terms →
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