Closing Accounts vs. Locked Box

Among different conditions of the M&A agreements, the parties must define if there will be price adjustment based on the financial variations between signing and closing. In case variations are considered then the method is the one called Closing Accounts. If there are no adjustment based on the results of this period, the method is called Locked Box. In order to define the method to be used the parties must know the consequences, benefits and risks of each of them.

In general the M&A transactions are structured with two different events. The first is the execution of the agreement which defines the rights and obligations of the parties and set forth corporate event to be performed (sale of shares, merger, spin-off etc.). The second is the closing when the transactions are concluded and it happens after certain conditions precedent are fulfilled. Taking as an example a plain vanilla purchase of shares, the closing normally is the event when the price is paid and