Choose between locked box, completion accounts and earn-out pricing for a transaction based on its risk profile.
Law & Contract Management
Locked Box, Completion Accounts and Earn-Out Mechanisms in Share Purchase Agreements
Trains transaction lawyers and finance teams to select, draft and negotiate locked box, completion accounts and earn-out pricing mechanisms in share purchase agreements.
🗓️Duration5 training days
📚Content4 modules · 8 sessions
🎓On completionAccredited attendance certificate
About the programme
Course Overview
Two parties can agree a headline price and still spend months arguing about what the target company was actually worth on the day it changed hands. Locked box, completion accounts and earn-out mechanisms exist to answer that question, and each shifts risk between buyer and seller in a different way. This course works through how to choose the right mechanism for a given deal, how to draft it so the numbers cannot be gamed, and how to resolve disputes when they are. Participants examine locked box structures and the leakage covenant that protects a fixed price agreed before completion, completion accounts prepared under agreed accounting policies with working capital and net debt adjustments, and earn-out clauses that defer part of the price against post-completion performance. Later sessions address the drafting detail that determines whether a mechanism works in practice: defined accounting policies, permitted leakage baskets, the expert determination process for a disputed completion account, and earn-out protections against a buyer running the business down to avoid payment. Delegates draft locked box leakage schedules, a completion accounts dispute notice and an earn-out clause with anti-embarrassment and conduct-of-business protections, leaving with wording they can adapt to their own transactions.
Expected Learning Outcomes
Draft a locked box leakage covenant with permitted leakage baskets and interest on unauthorised leakage.
Specify the accounting policies and sample calculations needed for a completion accounts mechanism to work.
Structure working capital and net debt adjustments so both parties can verify them without further dispute.
Draft earn-out metrics, conduct-of-business covenants and anti-embarrassment protections for deferred consideration.
Manage an expert determination or accountant's referral where the parties dispute a completion account figure.
Anticipate the incentives a chosen mechanism creates for management behaviour before and after completion.
Who Should Attend
Corporate lawyers drafting and negotiating share purchase agreements for private company deals
In-house counsel managing acquisitions, disposals and carve-outs on behalf of a corporate group
Corporate finance and financial due diligence advisers preparing completion account calculations
Private equity professionals structuring earn-outs for management-led buyouts and exits
Company finance directors responsible for post-completion accounts and earn-out reporting
Dispute resolution lawyers handling price adjustment and earn-out disagreements after closing
Course Modules
Select any module to see its sessions and points.
01Choosing a Pricing Mechanism
2 sessions · 8 points
Session 1Locked Box Structures and Risk Allocation
- Explain how a locked box mechanism fixes price by reference to a historic balance sheet rather than a completion date.
- Assess the interest and cash-free, debt-free adjustments used to compensate a seller for the locked box period.
- Identify deal circumstances, such as competitive auctions, where sellers push strongly for locked box pricing.
- Evaluate the buyer due diligence needed to accept locked box risk without a post-completion true-up.
Session 2Completion Accounts and Deferred Pricing Compared
- Compare completion accounts and earn-outs against locked box pricing across typical mid-market transactions.
- Match each mechanism to deal features such as carve-outs, distressed sales and cross-border consideration.
- Advise a client on the negotiating leverage each mechanism gives buyer and seller during price discussions.
- Draft heads of terms that commit both parties to a pricing mechanism before detailed agreement drafting begins.
02Drafting the Locked Box
2 sessions · 8 points
Session 1Leakage Covenants and Permitted Leakage
- Define leakage broadly enough to capture dividends, management fees, waived debts and off-market transactions.
- Negotiate a permitted leakage schedule that lets ordinary course payments continue without breaching the covenant.
- Draft indemnities and interest provisions that compensate a buyer pound for pound for unauthorised leakage.
- Allocate warranty and disclosure responsibility for leakage that occurs between signing and completion.
Session 2Locked Box Due Diligence and Completion Mechanics
- Scope financial due diligence to confirm the locked box balance sheet is accurate and free from hidden leakage.
- Draft completion deliverables and certificates confirming no leakage has occurred since the locked box date.
- Address currency, intra-group balances and contingent liabilities within a locked box completion statement.
- Handle a locked box deal where completion is delayed well beyond the original balance sheet date.
03Completion Accounts in Practice
2 sessions · 8 points
Session 1Accounting Policies and the Completion Statement
- Draft accounting policies and a sample completion statement that remove ambiguity before the deal signs.
- Set working capital targets and net debt definitions that reflect the target's normal trading cycle.
- Specify the timetable, access rights and information obligations for preparing and reviewing completion accounts.
- Address one-off and non-recurring items that distort a completion account if the policies are not precise.
Session 2Resolving Completion Account Disputes
- Draft an expert determination clause that limits the scope, evidence and cost of a completion accounts dispute.
- Prepare a dispute notice that identifies specific line items in contention rather than reopening the whole account.
- Manage the accountant's referral process, including submissions, document requests and the binding determination.
- Advise on interim payment mechanisms while a completion accounts dispute remains unresolved.
04Earn-Outs and Deferred Consideration
2 sessions · 8 points
Session 1Structuring Earn-Out Metrics and Protections
- Choose earn-out metrics, such as revenue, EBITDA or client retention, that match the business's value drivers.
- Draft conduct-of-business covenants that stop a buyer from managing the target to suppress earn-out payments.
- Include anti-embarrassment and change-of-control clauses that trigger payment if the buyer resells early.
- Address tax treatment and accounting for deferred and contingent consideration within the earn-out structure.
Session 2Managing Earn-Out Disputes and Exit Alignment
- Draft earn-out dispute resolution clauses covering calculation objections and access to post-completion accounts.
- Align management incentive plans with earn-out targets to reduce the risk of conflicting behaviour after completion.
- Advise sellers on monitoring rights needed to verify earn-out performance without disrupting the buyer's management.
- Negotiate early termination or acceleration of an earn-out where the underlying business is sold again.
What the participant receives
4 course modules
A structured syllabus
8 training sessions
across 5 days
32 detailed points
Applied, detailed content
Accredited attendance certificate
On completing the programme
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