Locked Box or Completion Accounts? Choosing Your Price Before The Price Chooses You

Every M&A deal has a headline price. It is the number in the press release, the figure the board celebrates and the one the seller quietly mentions at the golf club. It is also, surprisingly often, not the number that changes hands.

Between the date the price is agreed and the date the shares move, the business keeps living. It earns cash, spends cash, borrows, repays, pays salaries and, if the seller is feeling generous towards himself, pays dividends. The pricing mechanism is simply the contract's answer to one question: who owns that life in between?

There are two main answers. The locked box says the buyer does, from a date in the past. Completion accounts say nobody knows yet, so let us count it afterwards. Choose well and the price behaves. Choose badly and the price you fought for becomes the opening bid in a second negotiation nobody budgeted for.