Locked-box pricing fixes the deal value at a past moment — the box is “locked” — instead of renegotiating at closing accounts.

How it works

Buyer and seller pick a locked-box date and equity value. Seller runs the company until close under restrictions: no special dividends, no related-party asset sales, no management fees outside the ordinary course. Permitted leakage lists are negotiated tightly.

If the seller leaks value, buyer claims indemnity. Interest or ticking fees may accrue if regulators delay close.

Why it matters

• Founders: Faster price certainty than completion accounts, but less flexibility to capture upside between sign and close unless structured separately.
• Investors: Board must review leakage policies during the interim period — founder-controlled boards can accidentally breach.

Buyers prefer locked-box when they want certainty and can diligence the historical balance sheet thoroughly. Sellers prefer it when they believe performance is improving and want to capture upside after the locked-box date without completion-account fights.

Hybrid structures combine locked-box with earn-outs tied to post-close metrics — complexity rises quickly.

Common mistake

Assuming locked-box eliminates all post-signing adjustments. Material adverse change clauses and leakage still move economics.

Practical takeaway

Compare locked-box offers to completion-account alternatives on net proceeds, not headline price alone. Certainty has value, but leakage risk and interim covenants can erode seller economics if governance loosens after signing. Document every interim payment with buyer consent emails — informal approvals become leakage disputes at close.

Related ideas

• Locked Box (UK)
• Working capital adjustment
• Indemnity and escrow holdback