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<\/figure>\n\n\n\nIn sales law, this point in time is known as the “transfer of risk” and it is precisely this point in time that should be consciously agreed in addition to the purchase price when purchasing a company.<\/p>\n\n\n\n
Two different methods have become established in the practice of corporate transactions:<\/p>\n\n\n\n
1. Purchase price adjustment at the end (closing accounts)<\/h2>\n\n\n\n
“Transfer of risk” at the end of the process<\/strong><\/p>\n\n\n\n “Transfer of risk” at the time of the purchase price agreement<\/strong><\/p>\n\n\n\n [1] Under competition and antitrust law, approval from the competent authorities is required in certain cases. The transfer may not be completed before this.<\/p>\n\n\n\n Whether a purchase price adjustment mechanism (closing accounts) is more advantageous for the buyer or the seller depends heavily on the individual circumstances. In a booming market or with a company that is growing rapidly, a seller could benefit from the latter, automatic adjustment. Conversely, in an uncertain market or for a company whose performance is deteriorating regardless of the market, the seller would have to accept a discount.<\/p>\n\n\n\n However, there are advantages to fixed price agreements (locked box), which in our view are crucial for both parties to consider:<\/p>\n\n\n\n The percentage of locked box agreements increased significantly once again in Europe in 2022. The proportion is particularly high in the German-speaking countries (DACH) at 79%.<\/p>\n\n\n\n In addition, the acceptance of locked box benefits is increasing for medium-sized transactions up to EUR 100 million or where private equity companies are involved.<\/p>\n\n\n\n Source: CMS European M&A Study 2023<\/strong><\/p>\n<\/div>\n<\/div><\/div>\n\n\n\n This is a very simplified representation of the possible constellations and influencing factors in complex transaction processes.<\/p>\n\n\n\n In each individual case, a considerable amount of assessment and definition work is required. In order to protect your interests, it makes sense to involve experienced M&A advisors and lawyers. They use their practical experience to implement suitable transaction structures and contractual arrangements in solutions that work for you. It doesn’t always have to be us, but we can\u2026 “<\/p>\n\n\n\n If you are thinking about selling your company, there is\u2026<\/p>\n","protected":false},"author":1,"featured_media":2304,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2302","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-misc"],"yoast_head":"\n\n
If the net working capital at closing is higher than assumed at the time of the provisionally agreed purchase price, the purchase price is adjusted upwards 1:1.
If the debt of the target company at closing is higher than assumed at the time of the purchase price agreement, the purchase price to be paid would be adjusted downwards.
These adjustments ensure that the development of the company is only attributed to the buyer when he actually has access to it and can exert influence (transfer\/closing).<\/li>\n<\/ul>\n\n\n\n2. Fixed price agreement (locked box)<\/h2>\n\n\n\n
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In contrast to method 1, however, the purchase price is final. However, as the buyer has no access to or influence on the development of the target company until the final transfer (closing) (or may not have [1]), the company is virtually “closed” by both parties in its current state. Economic changes in the typical course of business from this locked-box date are therefore in favor or at the expense of the buyer.<\/li>\n\n\n\n
<\/strong>In return, however, the seller often receives a pre-agreed interest rate on the purchase price, which is not transferred to him on the locked box date, but only a few months later at closing.
In practice, the idea that the buyer is already entitled to any profit entitlement for the current year is included in the amount of interest to be agreed.<\/li>\n\n\n\n
<\/strong>As all company changes from the locked-box date onwards are already “for the account” of the buyer, there is no need for a purchase price adjustment at the time of the final transfer. Any profit or loss generated during this period is transferred together with the company. It also cannot be distributed to the seller in the short term without consequences, as the seller must reimburse the buyer in full for any capital movements (leakage) not associated with the typical course of business.<\/li>\n<\/ul>\n\n\n\n
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<\/figure>\n\n\n\nSo which is better?<\/h2>\n\n\n\n
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<\/figure>\n<\/div>\n\n\n\nImportant<\/h2>\n\n\n\n
Options – talk to us.<\/h2>\n","protected":false},"excerpt":{"rendered":"