What is a locked box?
In connection with the determination of the purchase price (equity value), the question arises as to which reporting date should be used as a basis. In the locked box method, a reporting date in the past is used to determine the purchase price adjustments. This concept always makes sense if there is not too long a period between the reporting date of the relevant annual financial statements and the signing or closing of the transaction. Accordingly, with the locked box method, the purchase price is determined on the basis of “outdated figures”. The risk of the ongoing liquidity development therefore lies with the buyer, but he is also entitled to the liquidity generated. Often, an interest rate is negotiated on the purchase price in order to compensate the seller for the free liquidity generated since the balance sheet date. (Opposite: closing accounts).
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