Christen Morand is a partner and public expert in Ernst – Young`s Forensic – Integrity Services Praxis and is headquartered in Chicago. It provides alternative dispute resolution and legal assistance services on a wide range of issues, including post-transactional litigation, purchase price litigation, working capital adjustments, analysis and settlement of merit and expertise provisions. She is a frequent person responsible for accounting for AM issues, mitigating merger disputes, and analyzing the language of the ATM contracts. In particular, buyers should also be aware that the amount of intercompany balance they must pay at closing is reasonable – either by obligation not to change these amounts (particularly intragroup loans or financial balances) after the entry into force, or by strict restrictions on the nature and volume of transactions between the business for sale and the seller. For the seller, a locked-box approach is difficult to apply without an anchored balance sheet and the seller can still lose if the “interest/benefit tax” is underestimated. First, the buyer needs reliablely locked box date accounts to engage in a box locking mechanism. The buyer does not have the opportunity to test the balance sheet of the objective by means of a final balance sheet, as would be the case under a final balance sheet mechanism. Therefore, the buyer is looking for accounts that are not obsolete at the time of signing and wants them to have been independently verified or verified. Since it is not possible to adjust the purchase price, a well-informed buyer should also: at a recent conference on AMs at the University of Chicago, organized by Commercial Consultants, a debate on innovation in The Final Conditions was a detailed topic on the use of the security box pricing mechanism. If the target group`s debts are repaid or refinanced once completed (as is often the case), the buyer has only a limited guarantee as to the amount of financing he will need.

While the purchase price to be paid for the target group (i.e. the value of equity) is set, the amount required to repay/refinance the existing liabilities of the target group is not. If the debt has increased since the date of the locked box, the buyer still has to repay/refinance the increased amount once completed. This is more important for buyers who use leverage to finance the purchase, as it is more difficult for them to take into account their financing needs or financing costs. As part of a closing balance sheet approach, the buyer usually has control over the establishment of the final balance sheet. As a general rule, this will put the buyer in a strong position to present his or her view on the fair value of certain goods, such as defective inventory or questionable debtors. However, with a locked field, the seller has control over the preparation of blocked box date accounts. As a result, even after careful financial diligence, the buyer can still take a risk for the value of the assets listed in the blocked box date accounts. If the investigation period is long between the validity date and the legal closing, the seller will of course ensure that he or she obtains value for the profit element between the validity date and the closing date. However, it is not desirable to put in place a price adjustment mechanism for this margin period – this would effectively reintegrate into the establishment of a final balance sheet. Determining the purchase price in a private transaction of the company is an integral part of the commercial negotiations and therefore of the purchase and sale contract.

In the United Kingdom, the two approaches normally used to calculate the price of the target transaction are either a final balance sheet adjustment or a closure mechanism. While a balance sheet adjustment mechanism may be the most common approach, the locked box mechanism is increasingly becoming the preferred route from a seller`s point of view, particularly for private investors or other financial sellers, where the ability to return value to stakeholders is essential.