Completion accounts: what they are and why they matter
- kamfaulkner
- Oct 2
- 5 min read
When you're buying or selling a business, agreeing a price is rarely as simple as shaking hands on a number. That "headline price" is often subject to adjustment, and one of the most common ways to make those adjustments is by using completion accounts.
If you're an owner preparing to sell, or a buyer about to acquire a business, understanding completion accounts is essential to avoid surprises and ensure you're paying (or receiving) the right amount. This guide explains what completion accounts are, how they work, and what to watch out for.
What are completion accounts?
Completion accounts are a set of financial statements drawn up after completion of a business sale. They provide a snapshot of the company’s financial position at the exact point ownership changed hands.
They're used to adjust the purchase price agreed in the sale and purchase agreement (SPA), to reflect the actual value of the business at completion, rather than estimates used at the time of signing.
Depending on what's agreed, the accounts might include:
Why use completion accounts?
Completion accounts are a tool for ensuring the buyer pays (and the seller receives) the right price, based on the actual financial condition of the business on the day of completion.
They're especially useful when:
There's a significant gap between signing and completion.
Working capital, stock, or debt levels fluctuate materially day-to-day.
The buyer wants the ability to test assumptions made during due diligence.
In simple terms, they provide a way to recalibrate the price to reflect reality.
How do completion accounts affect the purchase price?
The SPA will typically include:
A provisional purchase price, based on estimated figures (e.g. estimated net assets or working capital).
A mechanism to adjust that price once the completion accounts are agreed.
For example:
If the estimated net asset value was £1.2m, and the actual value from the completion accounts is £1.3m, the buyer pays the seller an extra £100k.
Conversely, if the actual value is only £1.1m, the seller refunds £100k to the buyer.
Adjustments are usually pound for pound, but parties can agree to apply multiples (e.g. for profit shortfalls) or thresholds (e.g. no adjustment unless the variance exceeds £50k).
What do completion accounts typically measure?
1. Net assets
One of the most common bases for adjustment. Net assets = total assets minus total liabilities.
Seller-friendly if the seller can show strong net asset value.
Watch out for disputes on valuations, provisions, and accounting treatment.
2. Working capital
Often used in more detailed or sophisticated deals. The aim is to ensure the business is sold with a 'normal' level of working capital.
If actual working capital > target: Buyer pays more.
If actual working capital < target: Buyer gets a refund.
Useful when the business has seasonal or fluctuating cash demands.
See more here: Working capital, explained
3. Cash and debt ("cash-free/debt-free" basis)
Some deals adjust the price to reflect actual cash and debt levels.
Buyer agrees to pay an enterprise value.
Actual cash is added to the enterprise value; actual debt is subtracted
See more here: Cash-free / debt-free, explained
Locked box vs completion accounts
Locked box and completion accounts are two different pricing mechanisms.
You can read more on the differences between the two here: Completion Accounts vs Locked Box: What’s the right price mechanism for your deal?
Completion accounts are more precise but create post-deal work and uncertainty.
Locked box offers price certainty but requires robust diligence and anti-leakage protection.
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) |
Who prepares the completion accounts?
Usually, the buyer prepares the first draft as they control the company post-completion.
The seller and their accountants get a chance to review and challenge.
Disputes are negotiated or referred to an independent expert.
Timelines and processes are agreed in the SPA.
Tip: Get accountants involved early to agree formats, principles, and timetables. Disputes are often about accounting treatments, not commercial intent.
Common accounting issues and disputes
Bad or doubtful debts; Should a provision be made?
Stock valuation; Obsolete or slow-moving stock?
Accruals and prepayments; Are they consistent with past practice?
Fixed asset values – Historical cost vs revaluation?
Pensions and tax provisions; Are they correctly measured?
Intra-group balances; Will they be settled or waived?
To reduce disputes:
Use clear accounting policies and principles in the agreement.
Provide a pro forma set of completion accounts.
Include a dispute resolution clause with an independent expert.
Completion accounts in practice: process & timeline
Deal signs with estimated figures and agreed mechanism.
Completion occurs and buyer takes control.
Buyer prepares draft completion accounts (typically within 30 to 120 days, depending on complexity).
Seller reviews and either agrees or disputes the draft (typically within 30 to 60 days).
Agreement or Negotiation or Referral to an independent expert.
Final purchase price agreed or determined, and payment made.
Seller tips
Negotiate a high estimated value.
Push for familiar accounting policies.
Consider using a collar (no adjustment unless variance > certain amount).
Be proactive: stay involved after completion to manage the process.
Know that delays or disputes can delay receipt of funds.
Buyer tips
Include specific accounting policies (UK GAAP or IFRS, plus deal-specific tweaks).
Consider a retention or escrow to avoid chasing refunds.
Watch for revenue recognition tricks.
Be rigorous in drafting definitions and targets.
Get your accountants fully engaged.
Advantages and disadvantages
Summary: is a completion accounts deal right for you?
If you want accuracy and can live with a bit of post-deal work, completion accounts offer a fair way to true-up the price. They suit deals where financial conditions can shift quickly or where the financial information is not up to date.
If you value certainty and speed, a locked box might be better.
Either way, the key is understanding what drives the price, agreeing clear rules, and making sure your advisers have been through the numbers in detail.
Short checklist: completion accounts essentials
Need help?
Completion accounts can be complex, but they don’t need to be a battle. With the right advice, they can be a smooth, fair way to get to the right price.
To discuss your situation, get in touch:
📩 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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