Completion accounts: Frequently Asked Questions

kamfaulkner
Sep 22
2 min read

Updated: Sep 23

What are completion accounts?

Completion accounts are financial statements prepared after a business sale completes. They confirm the actual financial position of the business at the moment of completion, and are used to adjust the final purchase price up or down based on real numbers.

When are completion accounts used?

They’re commonly used where:

The target’s cash, stock, debt or working capital can vary significantly day to day.
There’s a long gap between the last set of accounts and completion.
The buyer needs reassurance that the agreed price still reflects the value at completion.

What do completion accounts typically include?

They may include:

A full profit & loss and balance sheet.
A net assets statement.
A focused statement of working capital, cash, or debt.

The format depends on what’s being measured and what the parties agree in the contract.

Who prepares the completion accounts?

Either party can do it, but in most cases the buyer does, since they have control of the business post-completion. The seller usually has review and objection rights.

Each side will normally involve their own accountants, and if there’s a disagreement, an independent accountant may step in.

How is the price adjusted?

The final purchase price is adjusted based on a comparison between:

the estimated figures used at completion, and
the actual figures from the completion accounts.

This can lead to either:

a top-up payment to the seller (if the business was better than expected), or
a refund to the buyer (if the business underdelivered).

What are the benefits of completion accounts?

Reflects real value at the time of transfer.
Helps manage risk around fluctuating finances.
Can speed up the initial deal if you defer pricing disputes.

What are the drawbacks of using completion accounts?

Adds delay and complexity.
Risk of disputes over accounting treatments.
Extra cost; each side will usually involve accountants and possibly pay for an independent review.

Is there a better alternative to using completion accounts?

Sometimes. In seller-favourable deals, a locked box mechanism may be preferred. That fixes the price up front and avoids post-completion adjustments; provided the seller agrees not to extract value (“leakage”) from the business in the meantime.

For more info see Completion Accounts vs Locked Box: What’s the right price mechanism for your deal?

What should be agreed in the contract?

To avoid disputes, the SPA (or APA) should clearly set out:

Accounting policies to be used (GAAP, IFRS, etc.).
Definitions for cash, debt, working capital, etc.
How items like stock, WIP, bad debts, and intra-group balances will be treated.
Who prepares, reviews, and resolves the accounts.
Deadlines and timelines.

Need help working out what’s right for your deal? We’ll walk you through your options, without the jargon.

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.