A blocked boxing structure provides that the lens is evaluated on the basis of an updated historical balance sheet (and the purchase price is calculated) that was dated before the signing date of the De Spa contract. This is often extracted (but not always) from the target`s latest audited accounts. The amount of cash, debt and working capital is therefore agreed upon by the parties at the time of the signing of the GSB. When establishing the clause of the blocking box in a sales contract, there are some important aspects to consider: under the mechanism of the lock box, the purchase price of the company is fixed when signing on the basis of a balance sheet that precedes the actual sale of the company, i.e., .dem date of the locked box. The closing date chosen is usually the end of a fiscal year for which the financial statements were reviewed or targeted by both parties in relation to the transaction. The sales contract is drafted in such a way that the balance sheet is “completely closed” before the transaction is concluded by a leak or deterioration of the purchase price. Unauthorized leaks include items such as dividends or distributions paid to shareholders or business owners, administrative fees or asset transfers. Notwithstanding certain circumstances, the buyer and seller may agree on certain transactions such as dividend payments, investments or asset transfers. Given the continued appeal of Canada`s impressive cannabis and technology sectors to domestic and international investors, the locked box mechanism could become more day-to-day, with private equity firms looking to invest in these sectors. Given that blockchain technology and smart contracts are commonplace in M-A and commercial transactions, the locked box mechanism could generally become more common. As a result, the purchase price is set in a blocked box structure and the buyer supports the risk (and profits) of trading between the date of the security box and completion. In order to compensate the seller for the management of the business during this period, it is quite common for the seller to require the buyer to pay an additional amount (sometimes called “interest payment” or “ticker”) that is made daily until the actual completion date.
When developing the sales contract, it should be ensured that any reference to the validity date is verified to ensure that it does not conflict with other reference accounting data contained in the agreement (for example. B, any reference to the “billing date” or “financial statement”). At the close, the purchaser and his accountants would generally establish a number of financial statement accounts used to calculate net assets with an adjustment of the pound for pound of the purchase price, as long as the actual net assets exceeded or were below the objective agreed upon by the parties prior to the signing. However, if you start from a profitable transaction, an increase in borrowing on a portion of the balance sheet (for example. B greater working capital facility) should be recorded elsewhere on the balance sheet (more stocks, debtors, work in progress) to compensate for this situation, so this should be neutral for a buyer, except from the perspective of DerCashflow.