Deal StructureFinance
Locked-Box Mechanism
Also known as: Locked-box pricing, fixed-price mechanism, no true-up structure
A deal structure that fixes the purchase price at signing with no post-close working capital adjustment. The cleanest pricing mechanism for sellers — eliminates the buyer's ability to adjust the price after the wire.
WHY IT MATTERS
Why it matters. In a standard PE deal, the purchase price gets adjusted after closing based on a working capital true-up — measured by the buyer's accountants, using the buyer's methodology, 60–120 days after the wire hits. A locked-box mechanism eliminates that post-close adjustment entirely. The price is fixed at signing based on a balance sheet date before closing (the 'locked-box date'). Between that date and closing, the seller operates under a set of agreed restrictions (no leakage — no dividends, no unusual payments, no related-party transactions beyond normal course). In exchange, the seller gets certainty: the wire amount is the wire amount. No 40-page working capital calculation arriving three months later. Locked-box structures are seller-favorable because they remove the buyer's ability to use post-close measurement as a price adjustment mechanism.