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

Whether you're preparing to sell your business or looking to acquire one, one of the biggest deal-breakers, or deal-makers, is the purchase price. But in most transactions, the figure you see in the heads of terms is rarely the final amount paid.

Two of the most common methods used to adjust the price in business sales and purchases are:

• Completion accounts

• Locked box mechanisms

  
  

Each has its own strengths, risks, and strategic uses. If you're asking, “How do I get the correct value on my business sale?” or “How do I pay the correct price on my business purchase?” then this article will help you understand the differences, implications, and when each method is likely to work best for you.

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What are completion accounts?

Completion accounts are post-completion financial statements prepared to determine the final price of a business. Typically prepared within 30–90 days after the deal closes, they reflect the actual financial position of the business at the date of completion.

How it works

A typical completion accounts mechanism process

This method provides flexibility and post-deal accuracy but comes with additional time, cost, and the potential for disputes.

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When are completion accounts used?

Completion accounts are often favoured when:

• The target business is volatile or undergoing rapid changes.

• There is a lack of reliable up-to-date financial data at signing.

• Buyers want to ensure value for money by tying the price to actual rather than estimated performance.

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What is a locked box mechanism?

In contrast, a locked box mechanism sets the price based on a set of historical financial accounts, often prepared several months before signing. The key principle is that no value should leak out of the business between the locked box date and completion.

How it works

A typical locked box mechanism process

When is a locked box used?

The locked box is common where:

• The seller wants certainty of price and to avoid drawn-out post-deal negotiations.

• The target business is stable, with predictable cash flows.

• The buyer has been granted thorough access to due diligence and is comfortable with the financial information.

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Key differences between completion accounts and locked box: At a glance

Feature	Completion Accounts	Locked Box
Timing of Price Adjustment	After completion	Agreed before signing
Price Certainty	Lower for seller	Higher for seller
Buyer Protection	High (based on actual numbers)	Medium (based on warranties and covenants)
Complexity & Cost	Higher (needs post-deal accounts)	Lower (price agreed upfront)
Risk of Disputes	Higher (interpretation of accounts)	Lower (no post-deal true-up)
Seller Incentive	Reduced (price may be adjusted)	Stronger (price is fixed)

Practical considerations for sellers

If you’re a business owner preparing to sell, think carefully about what you want out of the deal:

Considerations for sellers using a locked box vs. completion accounts mechanism

A locked box may suit you if your finances are strong, clear, and you're working with a motivated buyer. But if your business is evolving rapidly or there’s uncertainty around working capital, completion accounts may be more appropriate—even if it means waiting longer to lock in the final price.

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Practical considerations for buyers

If you’re a buyer preparing to buy, your priorities might include:

Practical considerations for buyers considering locked box vs. completion accounts mechanism

Leakage

One key concern is “leakage” under a locked box structure. Buyers need clear covenants and tight controls to prevent unexpected costs from creeping in during the interim period.

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So… Which one’s right for you?

There’s no universal answer. But in general:

• Choose completion accounts if accuracy is paramount, and you're willing to trade speed and simplicity for financial precision.

• Choose a locked box if you're seeking efficiency, price certainty, and your financials support it.

In either case, expert guidance is essential, both legal and accounting. The right mechanism will not only affect your headline price, but also your risk exposure, negotiating power, and deal timeline.

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Final thoughts

Whether you're selling or buying, getting the price adjustment mechanism right is critical. It’s not just a technicality; it’s how you protect your value, manage risk, and build trust between parties.

Let’s talk through your plans and help you choose the right route:

📩 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.