Between the Spreadsheets Issue 6: Understanding Locked Box Mechanism – with Mazars Healthcare Transaction Advisory Services Practice

By Wayne Pryor, Richard Koppel and Uzair Azmat

April 21, 2021

In most sales transactions, both parties agree on the amount of working capital the seller must provide at the time of closing, which is typically outlined in the sales purchase agreement (“SPA”) between the parties. Determining the amount of working capital to leave the buyer can become a contentious issue between a buyer and seller at the close of a transaction.

The traditional method of using the closing working capital pricing mechanism is a lengthy process which can result in potential disputes over final price adjustment. Under this mechanism, the enterprise value is adjusted based on the closing balance sheet at the closing date of the transaction. Thereby both the parties are uncertain over the actual price of the transaction until settlement of the working capital pricing mechanism, which can typically be 90-180 days after the close of the transaction.

Read the full article here.

Mazars’ Healthcare Transaction Advisory Services Team

Wayne Pryor, Partner | Wayne.Pryor@MazarsUSA.com

Richard Koppel, Director| Richard.Koppel@MazarsUSA.com

Uzair Azmat, Consultant | Uzair.Azmat@MazarsUSA.com

 



Disclaimer of Liability

The information provided here is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.

Mazars USA LLP is an independent member firm of Mazars Group.


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