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Top 5 benefits of locked box mechanism

The choice between a locked box mechanism and a completion accounts mechanism is a crucial decision in mergers and acquisitions (M&A) transactions. Both methods are used to determine the final purchase price of a company, but they differ in their approach to handling the financial position of the target company at the closing date.

In this article, we will discuss the top five benefits of using a locked box mechanism over a completion accounts mechanism when selling a company.

1. Certainty and Simplicity

One of the primary advantages of a locked box mechanism is the certainty it provides to both the buyer and the seller regarding the purchase price. In a locked box arrangement, the price is fixed at a certain date before the completion of the deal, based on historical financial statements. This eliminates the need for post-closing adjustments and negotiations that often arise with completion accounts. The simplicity of a locked box structure streamlines the transaction process, reducing the potential for disputes and facilitating a quicker closing.

2. Reduced Post-Closing Disputes

The locked box mechanism minimises the likelihood of post-closing disputes between the parties. Since the purchase price is predetermined and explicitly defined in the sale and purchase agreement (SPA), there is less room for interpretation or disagreement after the deal is completed. This reduces the need for lengthy and costly negotiations related to financial adjustments, working capital, and other accounting issues that may arise in a completion accounts scenario. The parties can focus on the strategic and operational aspects of the integration process rather than engaging in protracted discussions over price adjustments.

3. Faster Closing Timelines

Locked box mechanisms generally lead to faster closing timelines compared to completion accounts structures. With a locked box, the purchase price is agreed upon and fixed early in the transaction process, allowing the parties to move swiftly toward completion. In contrast, completion accounts require additional time for due diligence, financial analysis, and negotiations post-closing. The expedited closing timeline associated with a locked box can be advantageous for both the buyer and the seller, enabling them to realise the benefits of the transaction sooner.

4. Enhanced Seller’s Position

Sellers often prefer locked box mechanisms because they provide a higher level of protection for the agreed-upon purchase price. Once the locked box date is determined, any financial fluctuations or changes in the target company’s value are usually borne by the buyer. This can be particularly advantageous for sellers as they receive the full agreed-upon consideration without the risk of downward adjustments. In contrast, completion accounts expose sellers to potential reductions in the purchase price based on changes in the target’s financial position (e.g. normalised working capital) between signing and closing.

5. Alignment of Interests

A locked box mechanism promotes alignment of interests between the buyer and the seller. Since the purchase price is fixed, both parties share a common goal of ensuring the target company’s financial position remains stable until the closing date. This alignment encourages collaboration and a focus on successful integration rather than adversarial negotiations over financial adjustments. The locked box structure can foster a sense of trust and partnership between the buyer and the seller, which can positively impact the overall success of the M&A transaction.


In conclusion, while both locked box and completion accounts mechanisms have their merits, the advantages of using a locked box mechanism – including certainty, reduced disputes, faster closing, enhanced seller protection, and alignment of interests – make it an attractive choice in many M&A transactions. However, the selection of the most suitable mechanism depends on the specific circumstances and preferences of the parties involved in the deal.

Locked Box vs Completion Accounts

We covered the topic of completion accounts vs locked box with Nick Davies from Steele Raymond in a video (below) which was part of our M&A Deconstructed Series, helping to demystify the company sale process.

If you are planning a company sale and want to understand better which closing mechanism would be more relevant to you, then contact us now for a confidential appraisal.

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