Tag archives: post-closing adjustments

Post-Closing Adjustments

Previously, we wrote about the use of earn-outs as a means by which buyers mitigate the risk of a target’s post-closing under-performance by holding back part of the purchase price and paying it out as the target meets certain financial targets.  In this post, we examine a related topic that is often confused with earn-outs but in fact is a separate tool in a deal-maker’s kit: post-closing balance sheet adjustments.

Unlike an earn-out where parties look to the future performance of an acquired business, a balance sheet adjustment is the parties’ opportunity to draw comparisons between the business as it … Continue Reading

Locking the box: an emerging tool to avoid post-closing negotiations

In Canada, private M&A transactions have long followed a familiar structure: the parties settle on a “cash free, debt free” price, which then must be adjusted post-closing to account for the target’s actual cash, debt and working capital (or other measures such as net assets) in an effort to reach the true “equity value” of the business. Calculating and settling these post-closing adjustments to the purchase price can frequently take many months and is one of the main causes of acrimony between buyers and sellers.

In light of these frustrations, it is perhaps unsurprising that one recent trend that has … Continue Reading

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