Unlike the Completion Accounts Mechanism, where the purchase price is finalized after Completion, in the “pure” Locked Box Accounts Mechanism, the purchase price is finalized prior to Signing, when the seller still holds title and control over the Target. Under the Locked Box Mechanism, the Equity Value is determined based typically on the accounts provided during the due diligence review. In its pure form this completion mechanism assumes the Equity Value will not fluctuate after the date of these accounts, and these accounts are therefore “locked”. Since Equity Value is “locked”, in practice any economic return from business operations of the Target passes on to the buyer virtually from the day following the Locked Box Accounts Date.
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