Under the locked box mechanism, the purchase price is fixed on the basis of a balance sheet at a past reference date. From that date, the economic benefit belongs to the buyer. To prevent value from flowing out, the purchase agreement prohibits leakage, such as distributions, asset transfers, waivers of claims against the seller or excessive salaries.
For sellers, this means discipline between the reference date and closing. Every payment to you or related companies must be agreed in advance. Breaches usually lead to an obligation to reimburse euro for euro. The buyer has a review period after closing for this purpose.
What remains permitted is set out in a list of permitted leakage. Typical items are ongoing salaries, market-rate rents or licence fees that have already been taken into account in the purchase price. In return, the seller often receives compensation for the period, for example interest on the equity value (ticking fee).
Example
Hypothetical example: The locked box date is 31 December, closing is 30 April. In March, the GmbH pays the seller an unagreed bonus of €120,000 and pays invoices of the seller's private holding company totalling €30,000. The seller must reimburse €150,000 to the buyer.
Leakage vs. permitted leakage
| Feature | Leakage | Permitted leakage |
|---|---|---|
| Example | Distribution, waiver of claims | Agreed salaries, rent |
| Reflected in the price | No | Yes |
| Consequence | Reimbursement euro for euro | None |