Locked Box Mechanism
A deal structure where the price is fixed at signing based on a historical balance sheet date, with no post-closing price adjustment.
Also known as: Locked box, Fixed price mechanism
One-line definition
In a locked box deal, the equity price is agreed at signing using a reference balance sheet from a past date; the seller bears economic risk between that date and closing.
Seller protections
The SPA contains anti-leakage provisions preventing the seller from extracting value (dividends, related-party payments) after the locked box date.
Buyer protections
The buyer typically receives a daily interest accrual (ticker) from the locked box date to completion, compensating for the economic ownership already transferred.
TS role
TS verifies the locked box balance sheet and identifies any leakage — actual or potential — between the locked box date and signing.
Related terms
Completion Accounts
A post-closing price adjustment mechanism where the actual balance sheet at the completion date is compared against an agreed target to determine a price true-up.
Cash-Free Debt-Free
The standard basis on which M&A deals are priced: the Enterprise Value assumes the target is delivered with no cash and no debt at closing.
Net Working Capital
The normalised level of working capital a target business needs to operate — a direct lever on the purchase price.