A Primer On 'Locked-Box' Deals

By John Pollack and Pavel Shaitanoff (November 15, 2017, 5:19 PM EST) -- It is customary in U.S. private mergers and acquisitions for the parties to agree on a headline purchase price and then adjust it at closing for debt, cash and normalized working capital. This is an accepted practice (sometimes referred to as a "closing accounts" approach) even though it can lead to lengthy post-closing disputes on, among other things, the closing working capital calculation.

In the United Kingdom, it is common to adjust the purchase price based on a "locked-box" approach. The target is sold at a fixed price based on a presigning balance sheet, which is either audited or otherwise agreed...

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