Chester 01244 405 555

Grosvenor Court
Foregate Street Chester
Cheshire CH1 1HG
DX: 19990 Chester


Shrewsbury 01743 443043

Lakeside House
Oxon Business Park
Shrewsbury SY3 5HJ
DX: 148563 Shrewsbury 14

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Airport City, Manchester 0161 537 3324

Offices 204 and 205
Manchester Business Park
3000 Aviator Way
Manchester M22 5TG

Understanding Completion Accounts

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21st February, 2020

Completion accounts are a common method used to confirm and adjust the purchase price when buying or selling companies.

Their purpose is to confirm the actual financial position of the target company at completion of the sale transaction and, if this is different to what was estimated or expected, allow the purchase price to be adjusted up or down after the transaction documents have been signed.

Completion accounts are used to verify the net assets and/or working capital of the company or other accounts based measurements as at completion that are key to valuing the business being acquired. The completion accounts are typically prepared by the purchaser’s accountants within an agreed period after completion and, once finalised, may cause an adjustment of the purchase price – whether by a repayment of part of the purchase price by the seller to the purchaser or an additional payment by the purchaser to the seller. Detailed accounting principles and bases to be applied when preparing the completion accounts are normally confirmed in the transaction documents.

A mechanism will typically be included for the completion accounts to be settled by an independent accountant in case the purchaser and seller cannot agree the content of the completion accounts.

An alternative to using completion accounts, but perhaps less common, is the ‘locked box’ method. This creates a fixed purchase price by reference to an agreed value of the company as at a date in the recent past (e.g. the end of the last accounting period).

No adjustment is made to the price after the completion date, but the seller typically gives the buyer protection against any unpermitted cashflows or ‘leakage’ (e.g. dividend payments and bonuses) between the locked box date and the completion date which would reduce the value of the target company.

Stuart Scott-Goldstone

Corporate & Commercial

Head of Team & Partner
Email: [email protected]
Tel: 01244 405 552

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