medium · Private Equity & LBOs

In a 'Locked Box' pricing mechanism, what is 'Leakage'?

1. Value transferred from the target company to the seller between the locked-box date and the closing date.
2. Cash flow that is used to pay down existing debt before the transaction closes.
3. The loss of key customers or employees during the period between signing and closing.
4. The amount by which actual working capital falls below the target working capital peg.

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