Post-Closing Adjustments: Mechanisms

Post-closing adjustments are typically included in  the transaction  documents of any M&A  transaction when there is a period  of time  between  the determination of purchase price  consideration and the closing of the acquisition, usually substantial enough to have a bearing on   the value of the target determined as of  the signing date. The rationale for using post-closing  adjustments is to bridge the gap between the value of the target as determined at the time of  signing of the transaction documents and at the time of close of  the transaction  and  to   allocate the risks of business operations during this period between the purchaser and the seller.  A well negotiated post-closing mechanism will allay the concerns  of the seller (in relation to the  agreed consideration) and the purchaser (in relation to leakage of the value of the target) and  increase the certainty of closure of the transaction.