The SPA sets out the price mechanism (completion accounts or locked box), definitions of net debt and working capital, earn-out provisions and indemnity caps. Aligning financial definitions with due diligence findings helps prevent disputes.
Related terms
Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.Locked box mechanismA price mechanism in which the purchase price is fixed on the basis of financial statements at a date before closing, and leakage of value after that date is prohibited.Earn-outA mechanism under which part of the purchase price is paid depending on the target company reaching certain performance targets after closing.Net debtFinancial debt and similar liabilities less cash and cash equivalents.Cost of capitalThe minimum rate of return investors expect from an investment in return for the risk they take.Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.
Last updated: October 22, 2026 · This definition is for general information only.