{"id":174,"date":"2025-09-03T14:55:13","date_gmt":"2025-09-03T14:55:13","guid":{"rendered":"https:\/\/www.trainy.co\/blog\/?p=174"},"modified":"2025-09-03T14:55:13","modified_gmt":"2025-09-03T14:55:13","slug":"locked-box-mechanism-pros-cons-explanations","status":"publish","type":"post","link":"https:\/\/www.trainy.co\/blog\/en\/locked-box-mechanism-pros-cons-explanations\/","title":{"rendered":"A closer look at the locked-box, the new M&A trend"},"content":{"rendered":"\n

The \u00ab\u00a0locked-box\u00a0\u00bb mechanism has become increasingly popular in the M&A world in the last few years. It is a device used in the final stages of a transaction to negotiate the closing.<\/strong> The \u00ab\u00a0locked-box\u00a0\u00bb is a tool that enables the amount of the transaction to be fixed upstream, rather than at the time of closing. In this article, we explain in detail how the \u00ab\u00a0locked box\u00a0\u00bb works!<\/p>\n\n\n\n

Read more: <\/b>Warrant: definition, operation and how to invest?<\/b><\/a><\/p>\n\n\n\n

What is a \u00ab\u00a0locked box\u00a0\u00bb?<\/b><\/h2>\n\n\n\n

How do you explain a \u00ab\u00a0locked box\u00a0\u00bb? The mechanism of the \u00ab\u00a0locked box\u00a0\u00bb consists in bringing forward the moment of payment for the transaction, and therefore the transfer of ownership.<\/strong> In a \u00ab\u00a0classic\u00a0\u00bb M&A transaction, the financial transaction takes place at the \u00ab\u00a0closing\u00a0\u00bb, i.e. the final stage of the deal, when the assets and properties are being transferred for the agreed upon price. Conversely, with the \u00ab\u00a0locked box\u00a0\u00bb, the transaction takes place during the \u00ab\u00a0signing\u00a0\u00bb stage<\/strong>, which can be seen as the preliminary sales agreement. <\/p>\n\n\n\n

In this way, the amount of the transaction is determined on the basis of the company’s historical accounts<\/strong>. From the moment of signing, the acquirer becomes the owner of the cash flows generated by the company, and the amount agreed between the two parties is set aside in a \u00ab\u00a0locked box\u00a0\u00bb, to be unlocked at closing. <\/p>\n\n\n\n

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<\/b>  <\/p>\n\n\n\n

What are the advantages of the locked box?<\/b><\/h2>\n\n\n\n

The \u00ab\u00a0locked box\u00a0\u00bb has gained in popularity in recent years. According to a 2020 study by law firm DLA Piper, 50% of M&A transactions used a locked box in 2020,<\/strong> compared with just 36% in 2018. To what can we attribute this growing appeal of the \u00ab\u00a0locked box\u00a0\u00bb? The main advantages of the \u00ab\u00a0locked box\u00a0\u00bb are:<\/p>\n\n\n\n