In this exercise, we've got two mechanisms. We've got the closing accounts mechanism and the locked box mechanism.

In closing accounts, we have that initial calculation, which is based on a historical balance sheet.

because we don't have the closing balance sheet. We've got an enterprise value of 200.

So I'll go and get debt from the historical balance sheet, which is 20.

Then I will go and pull in cash from the historical balance sheet as well, which is 12.

And then I'll pick up the operating working capital again from the historical balance sheet. That could also be an estimate by accountants.

So the equity purchase price, I'm just going to sum up those key numbers.

Enterprise value minus debt plus cash, and that will give me 192.

So that's the initial estimate.

The final price is based on actuals and we've got the actual balance sheet. So I'm going to redo this calculation and I'll go in and get debt.

Now debt is unlikely to change and again, it stayed at 20.

So I'll take that at completion and I'll pull in that 200 final price as well to move that down a little bit.

And then I'll pull in cash from the balance sheet too that 31.6.

The cash are significantly higher.

And then the operating working capital, again, I'll put in the pull in the operating working capital at completion from 4.2.

So I've got my numbers there.

And this means the estimated equity price, which actually is an estimate if you haven't actually haven't got the completion balance sheet yet.

So at completion you'll make an estimated balance sheet and then you'll do a drop later on.

So let's say we're at completion and we're using estimated numbers.

So to cut the estimated equity price, we'll do the normal sum.

So the enterprise value, less debt plus cash.

But then what we'll also do is we'll add in any true up because of the operating working capital.

So I'll take the actual estimated balance of operating working capital.

We put that in parentheses minus what we had targeted.

So this means the operating working capital is going to be slightly higher than it was in reference balance sheet.

So we've got a valuation of 211.18.

It says game for seller, but that's a bit of a misnomer. Let me change that. This is extra payment to vendor because this reflects actuals.

So this means we had initially done an analysis based on the historical balance sheet of 192.

At completion, the payment is 211 based on the estimated balance sheet, estimated cash debt, and the operating working capital.

Then beyond this, there will be a further true up when you actually Get the completion accounts.

So you can see in a completion accounts mechanism, you have the reference balance sheet you'll do an analysis on.

Then you'll have to do a true up based on estimates at completion.

And then finally, when you actually get the completion accounts, there'll be a further true up to reflect the actuals at that date.

Let's see how different a locked box is.

If I go in and get my cash free debt-free price is, I want to go and pull in debt.

And these are going to come from all the same ones as we've got up above.

Because this is the reference balance sheet.

So you've got debt, cash, and the operating working capital is going to be 4 as well.

Because the reference balance sheet, so the total equity payment is going to be the sum of those three items.

So it's still 192.

Then we have a little bit of leakage here.

And what this means is between the date of that reference balance sheet and completion, there's been a dividend paid.

So we'll calculate the dividend and we'll go up to net income in row 54.

And this is going to be the dividends in column E.

And I'll just multiply that by 25%.

Don't like putting a hard number in, but I've got to do that.

So this means we then can calculate the accrual.

So what the accrual does is compensate the seller for the fact that they've effectively sold the business at the historical balance sheet date.

So they need to return on their money from that date to the data completion compared to the historical historical balance sheet is one quarter or three months.

So we'll only accrue that for three months.

And this means I'll take the total equity payment, but because we have received a dividend, I'm going to subtract that dividend. So I'll get in the net proceeds and then I'll multiply that by the accrual amount, 10% and I'll multiply that by 3 over 12 to factor in a partial period.

And we get 4.6 million in the actual price to pay.

This will take the cash free, debt-free price we had previously, the 200, and then we'll take off the debt.

So that cash is going to be reduced by dividend amount of 6.3.

So we'll only get 5.7.

So the equity value, if we sum that up, is gonna be 185.7 plus we are also going to have to pay the accrual of 4.6, and that means if we come down to the bottom, now we can get the price to pay, which is going to be the equity value plus the accrual.

So the total price to pay based on the final values, it's gonna be 190.

And that reflects number one.

We've got some leakage because of dividends.

Number two, we have got an accrual between the reference balance sheet date and the completion date.