Locked Box

The locked box is a purchase price mechanism in which the price is set and firmly agreed on the basis of an already completed, audited balance sheet position at a date in the past (the locked box date). Unlike the closing accounts model with a subsequent purchase price adjustment, the amount to be paid is already fixed at signing.

From the locked box date until closing, the buyer economically bears the opportunities and risks of the company. In return, so-called leakage clauses protect the buyer against any improper outflow of value to the seller during this period – such as distributions, bonuses or payments to related parties. Permitted leakage is defined in advance.

The locked box creates deal certainty and reduces subsequent disputes, but it requires reliable and audited figures. In our due diligence we examine the robustness of the locked box balance sheet and, in our transaction structuring, we design appropriate leakage protection.