How it works in a data room
The seller uploads the locked box accounts, often audited or reviewed, along with supporting schedules for cash, debt and working capital at the locked box date. The buyer’s financial due diligence focuses heavily on those accounts because there will be no later adjustment. The purchase agreement lists permitted payments, such as normal salaries, and prohibits others, such as dividends or management fees, between the locked box date and closing. Any breach is repaid by the seller.
Why it matters in a deal
Locked box deals give both sides price certainty at signing and avoid a post-closing argument over the final balance sheet. They are common in European private equity exits and competitive auctions. The trade-off is that the buyer carries the trading risk from the locked box date, so the quality of the accounts and the protections against value leaving the business matter a great deal. The alternative is a completion accounts mechanism, where the price is trued up after closing.
Example
A fund selling a Dutch packaging business uses audited accounts as the locked box, dated four months before expected closing. The buyer reviews them in detail, negotiates a list of permitted payments and adds an interest charge on the equity price from the locked box date. After closing, the buyer finds a consulting fee paid to the fund that was not permitted, and the seller repays it. The private equity guide covers exit mechanics.