medium · Private Equity accounting-flow
In a 'Locked Box' transaction mechanism, the buyer agrees to an equity price of $300M based on a balance sheet from three months ago.
If 'Leakage' of $5M is discovered (e.g., an unauthorized dividend), how is the final price adjusted?
- The equity price is increased by $5M to $305M
- No adjustment is made as the price was fixed at signing
- The adjustment is handled through a post-closing working capital true-up
- The equity price is reduced by $5M to $295M
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