Completion accounts are closing-date financial statements that drive true-up adjustments to transaction price in many private company sales.

How it works

The purchase agreement sets a baseline price plus mechanisms to adjust for net debt, cash, and working capital versus a target or collar. At or shortly after closing, parties prepare completion accounts per specified accounting policies. If working capital is below target, price often decreases dollar-for-dollar within agreed definitions; excess cash may increase price to sellers. Disputes go to an independent accountant as expert determiner. Unlike locked-box deals (price fixed at a historical accounts date), completion accounts focus on the moment of transfer. Venture exits via strategic sale may use completion accounts when the buyer wants balance-sheet certainty. Founders should freeze unusual payments pre-close and document normal course operations.

Why it matters

• Founders (sellers): Operating choices in the final weeks—paying bonuses early, accelerating payables—affect proceeds. Finance and counsel must run a closing balance sheet playbook.
• Investors: Preferred liquidation flows through adjusted consideration; distribution models should stress downside adjustment cases.
• Buyers: Completion accounts protect against last-minute value extraction and align price with economic reality at handover.

Common mistake

Assuming headline enterprise value is the wire amount. Without meeting working capital targets, sellers routinely receive less after completion account adjustments.

Related ideas

Working capital adjustment, locked-box mechanism, purchase price adjustment, net debt, and escrow holdbacks relate to completion accounts.