Completion accounts versus locked box: five considerations
The choice of price mechanism affects risk, certainty and effort in every deal.
Understanding the advantages and drawbacks of each mechanism.
Completion accounts
The price is adjusted after closing based on accounts at completion. Accurate but slower and prone to disputes.
Locked box
The price is fixed based on historical accounts, with protection against leakage. Certain but requires trust in the accounts.
Which works for you?
Consider the target's financial reporting, the parties' bargaining power and the time between signing and closing.
Making a choice
Buyers often prefer completion accounts; sellers often prefer a locked box.
Conclusion
The right mechanism depends on the deal.
Summary
Choose the price mechanism that best balances certainty and risk.
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