So there are two main completion mechanisms. One is completion accounts. So the accounts are prepared actually after you've handed over the cash, so after the sale, which of course, is worrying because at that point, the acquirer has control of the business. You've also got to estimate the cash and debt balances at completion 'cause you don't have a set of accounts, they haven't been prepared yet, and you need to estimate the CapEx and operating working capital adjustments just in case the vendor has underspent current CapEx or has ripped operating working capital out of the business. And all those need to go to the SPA and be adjusted. And the calculation of the enterprise value to equity bridge will be documented in the Sale and Purchase Agreement. And the lawyers will typically call the enterprise value the cash-free and debt-free price. And then after all that, after the completion date, you have a true up mechanism, where all those estimates are then checked against the accounts prepared at the completion date and you have to make adjustments if they are different from the estimates. So you could get a nasty surprise as either a buyer or a seller. Alternatively, a more simple method is the locked box mechanism. And this is where instead of getting accounts at the completion date, you go back in time to a historical set of accounts, and obviously you'll need to check them, but you will value the business at that date and you'll use the cash and debt numbers, look at the CapEx and the operating working capital up to that point, and you'll make any adjustments based on those accounts. Now, the good news is that you just have one number in the Sale and Purchase Agreement. However, the bad news is you're gonna make sure because you don't own the business. Well, you do effectively, economically own the business, but you don't control the business from the locked box date to completion. You've gotta make sure that there's no leakage. And what that means is any cash leaving the legal entity between the date of the locked box accounts and the date of completion. Now, there may be some permitted leakage, i.e. some cash that you allow to leave the business, like dividends or management charges. But again, they will be deducted from the price and that will be documented. But you definitely want to monitor non-permitted leakage, things where cash had left the business that you haven't agreed. But because you have effectively taken economic ownership at the locked box accounts date and you only give the cash at the completion date, then the vendor will typically expect some return for that period. In other words, the profit participation from the date of the locked box accounts to completion to compensate from the fact that they weren't allowed to take any cash out of the business. So those are the two methods. Typically, private equity firms prefer locked box. Locked box certainly is a newer method, or certainly come into its own more recently than completion accounts, and people increasingly like it because of the certainty. There's no true up adjustments.
