Completion accounts, explained
- kamfaulkner
- Sep 19
- 4 min read
Updated: Sep 23
When you’re buying or selling a business, you’ll often hear the term completion accounts. But what are they, and why do they matter?
If you’re a first-time seller or buyer running an owner-managed business, this article gives you a clear, jargon-free explanation of how completion accounts work, and what they mean for you.
What are completion accounts?
Completion accounts are financial statements prepared after a deal has completed. They show the actual financial position of the business at the moment the deal closed.
Rather than fixing the purchase price at the time of signing, completion accounts allow the buyer and seller to agree a provisional price up front—and then adjust that price later based on the business’s true financial state at the point of handover.
This approach helps ensure that:
The buyer doesn’t overpay for a business that’s underdelivered.
The seller can still benefit if the business was better than expected at completion.
Think of it as a post-deal balancing act. You agree the terms, complete the sale, and then both sides settle up once the dust has settled.
Why do they matter in SME deals?
In most SME acquisitions, price is based on recent management accounts or last year’s financials. But as you know, cashflow and working capital can shift day to day.
Completion accounts provide a way to:
Recalibrate the price to reflect the real position at the date of completion.
Test assumptions made during the deal, such as net assets, working capital, or debt levels.
Avoid surprises, like finding out post-sale that the business had more liabilities or less cash than expected.
They're especially useful when the gap between signing and completion is short, or when the buyer is cautious and wants reassurance on what they’re getting.
What do completion accounts include?
Completion accounts can vary depending on the deal and what the buyer wants to measure.
Here are the most common components:
1. Net asset adjustment
Compares the actual net assets at completion with a target figure.
If the business had more (or less) than agreed, the price goes up (or down) pound-for-pound.
2. Working capital adjustment
Looks at cash needed to keep the business ticking over day to day.
If working capital is lower than expected, the buyer may pay less, or vice versa.
3. Cash-free / debt-free adjustment
Adjusts the price based on the business’s actual debt and cash at completion.
Common when the deal is based on enterprise value (the value before cash/debt is factored in).
How does the process work?
If the parties disagree on any figures, the acquisition agreement usually includes a mechanism for resolving disputes, often by bringing in an independent accountant as a neutral expert.
Who prepares them?
This is often negotiated. Sometimes the buyer prepares the first draft (since they now control the business and have access to the records). Other times the seller may want to take the lead, especially if they know the accounting systems inside out.
Each side usually involves their accountants to double-check the numbers, especially when it comes to subjective items like provisions, stock, or prepayments.
Why might a seller want to avoid completion accounts?
Because they create uncertainty and delay.
In seller-friendly deals, particularly competitive sales or private equity exits, it’s common to use a locked box mechanism instead. That means the price is fixed up front using a historic balance sheet, with no post-completion adjustment.
Locked box gives the seller more control and a clean break.
But if you’re the buyer, or selling to someone who insists on due diligence and protection, completion accounts can be a fair way to land on the right final price.
A quick example
You’ve agreed to sell your engineering business for £2m, based on £400k working capital and zero debt.
At completion:
The buyer pays £2m provisionally.
A few months later, the completion accounts show working capital was only £350k.
The buyer claims a £50k adjustment, and you refund that amount.
Alternatively, if the working capital had been £450k, you’d be entitled to a £50k top-up.
Related terms
Locked box – a pricing method that fixes the price using a past balance sheet, with no post-deal adjustment.
Enterprise value – the total value of a business, before factoring in cash or debt.
Purchase price adjustment – the final tweak to the price based on agreed metrics (like net assets).
Summary: what SME owners need to know
If you’re selling or buying a business, here’s the key takeaway:
Completion accounts are a tool for fairness, but they also add complexity, delay, and scope for disagreement.
Handled well, they protect both sides and help close any pricing gap. But they need to be planned early and drafted clearly in the main sale-and-purchase agreement.
Quick checklist: is a completion accounts mechanism right for your deal?
Let’s make your deal smoother
Need help structuring your deal with completion accounts—or deciding if they’re right for you? We’re here to talk through your options and draft terms that work for your business.
📩 info@orbitlegal.co.uk | 📞 0115 6777095 |
Disclaimer
This content is for general information only and doesn’t constitute legal, accounting, financial, or tax advice. It’s based on the law of England & Wales and was correct at the date of publication, but the law and guidance can change. Reading this page doesn’t create a solicitor–client relationship with Orbit Legal. Please take advice on your specific circumstances before acting. Get advice for your situation by contacting Orbit Legal at info@orbitlegal.co.uk or 0115 6777095.
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