Locked Box

Under the locked-box method, the purchase price is fixed as at a date in the past (the ‘locked-box date’) based on audited balance-sheet data. Between the locked-box date and closing, no economic benefits may flow out of the company to the seller without the buyer’s consent (‘leakage’); permissible transactions are expressly agreed as ‘permitted leakage’.

The seller frequently receives a flat remuneration component for the period between the locked-box date and closing (an ‘equity ticker’). The method offers transaction certainty and avoids elaborate closing accounts but presupposes a robust balance sheet as at the reference date.