Completion Accounts vs Locked Box in UK Deals: Which Fits?

When you’re selling a business or bringing in investment, the deal price isn’t always as fixed as it first looks.

In UK deals, completion accounts and locked box are the two main ways to settle that final number, and the choice comes down to one thing most owners care about: certainty versus accuracy. It can affect price, timing, risk, and how smooth the whole process feels, which is why it matters so much for SMEs planning growth or exit.

If you’re weighing up which structure fits your deal, Talk to an ICAEW-regulated Corporate Finance Adviser today.

What each pricing method actually means

The two pricing methods do the same job in different ways. One adjusts the price after completion, the other fixes it much earlier and only leaves room for limited exceptions. If you understand that difference, most of the deal mechanics start to make sense.

For SMEs, this is not just a legal label. It affects when you know the real sale price, how much risk sits with each side, and how much back-and-forth you may face after signing.

How completion accounts work in practice

With completion accounts, the parties agree an estimated price at completion, then come back later to settle the final number once the actual figures are known. That first payment is only a starting point, because the accounts at closing may not yet be ready.

After the deal closes, the final accounts are prepared and compared with the assumptions used in the SPA. The main items usually trued up are cash, debt, and working capital, so the price reflects the business as it actually stood on completion day. If the company had more cash or less debt than expected, the seller may get more. If the working capital was weaker than assumed, the buyer may pay less.

The headline price is not always the final price. With completion accounts, the balancing payment comes later.

That is why completion accounts can feel like a second round of pricing. The buyer and seller may need to settle a balancing payment after closing, once the numbers are signed off. If you want a deeper look at the mechanics behind this, our guide on working capital adjustment mechanics is a useful next step.

How a locked box deal stays fixed

A locked box deal works differently. The price is set using historic accounts at a reference date, then fixed up front. From that point, the buyer usually takes the economic risk, even though legal completion may happen later.

This is why locked box gives more certainty. The seller knows the price earlier, and there is no routine post-completion true-up for normal trading movement. In practice, that means the seller must not take value out of the business between the locked box date and completion.

That value extraction is called leakage. It is usually easy to spot in principle, things like unauthorised dividends, management charges, or cash moving to the seller or its wider group. If leakage happens, the buyer normally expects repayment, pound for pound, unless the SPA allows it as permitted leakage.

For a broader comparison of deal mechanics, comparing completion accounts and locked box mechanisms helps show how the final price is actually fixed in each structure.

If you’re deciding which route suits your deal, Talk to an ICAEW-regulated Corporate Finance Adviser today.

Why UK buyers and sellers often prefer different approaches

The split is simple enough. Buyers usually want the price tied to the business as it really stands on completion day. Sellers usually want certainty, a clean exit, and as little post-deal friction as possible.

That is why the same deal can look attractive in two completely different ways, depending on which side of the table you’re sitting on. One side wants protection against overpaying. The other wants a fixed number and no comeback later.

Why buyers often like completion accounts

Buyers tend to favour completion accounts because they want the final price to reflect the company’s actual position at closing, not a snapshot from weeks or months earlier. If cash has fallen, debt has risen, or working capital has moved around, they want that captured in the price.

That matters in UK deals where trading can shift quickly between signing and completion. A busy quarter, a delayed customer payment, or a chunky supplier bill can all change the economics of the deal. Completion accounts give the buyer a way to catch that movement and avoid paying for value that has drifted out of the business.

Buyers often see completion accounts as a safety net. It adds admin, but it can stop them paying too much.

There is no sugar-coating it, completion accounts can be more work. You need extra reporting, more review, and usually more negotiation after closing. Still, many buyers accept that trade-off because the downside is worse. Overpaying for a business is hard to unwind, and a few weeks of extra admin is a small price if it cuts that risk.

For a more detailed look at how the working capital piece can move the final price, see understanding the working capital peg.

Why sellers often like locked box

Sellers usually prefer locked box because it gives them a fixed price and fewer surprises. Once the price is agreed, they can move towards completion with more certainty and less scope for a post-deal row over cash, debt, or working capital.

That certainty matters. Sellers often want a clean exit, not a long tail of questions after completion. A locked box deal also reduces the follow-up work that comes with preparing and debating completion accounts, which makes the whole process feel more contained.

There is another reason sellers like it, they know where they stand earlier. That makes planning easier, especially if the sale proceeds are being used to pay down debt, reinvest, or move on to the next project. If the deal is moving at pace, a locked box structure can also help keep momentum and reduce the chances of the price being reopened later.

For owners planning an exit, the right structure depends on how much certainty you want and how much post-signing adjustment you can live with. If you are weighing that up, Talk to an ICAEW-regulated Corporate Finance Adviser today.

The real-world trade-offs that change the answer

On paper, the choice looks neat. In practice, it depends on how messy the business is, how long the deal takes, and how much trust sits between buyer and seller.

A company with steady trading, clean reporting, and a short path to completion can often use a locked box without much fuss. A business with moving cash balances, shifting stock, or a long delay between signing and completion is a different story. That is where the final price needs more room to breathe.

When completion accounts make more sense

Completion accounts are usually the better fit when the numbers move around a lot. If working capital rises and falls through the year, or cash positions change quickly, a fixed historic snapshot can feel too blunt.

They also suit deals where the gap between signing and completion is long. The longer that gap, the more chance there is for the business to change in a way that matters to price. Seasonal businesses, fast-growing SMEs, and companies with lumpy customer receipts often fall into this camp.

In simple terms, completion accounts work well when you need the final price to track reality, not guess at it.

• Businesses with seasonality, where one quarter looks nothing like the next
• Companies with changing working capital needs
• Deals where cash moves quickly or debt levels shift
• Transactions with a long signing-to-completion period

If that sounds like your deal, the extra admin may be worth it. It keeps the final number tied to the actual position on completion day, which is often the fairer result.

When locked box is the cleaner option

Locked box tends to work best when the business is stable, the accounts are reliable, and both sides want speed. If the seller wants a tidy process and the buyer is happy to rely on historic numbers, it can keep the deal moving without a long post-completion argument.

It also suits situations where leakage protection does most of the heavy lifting. The buyer accepts the historic figures, the seller agrees not to extract value before completion, and the price stays fixed unless something outside the rules happens.

That makes locked box feel cleaner. Less wrangling, fewer moving parts, and a clearer path to closing.

If the business is steady and the accounts are solid, locked box is usually easier to live with.

How deal timing, trust, and complexity affect the choice

The longer the period between signing and completion, the more risk sits on the table. A deal that drags on gives cash, debt, and trading performance more time to move, so the pricing method matters more than ever.

Trust matters too. Where both sides are comfortable with the figures and the business is easy to understand, locked box is often the smoother route. Where the business is more complex, or the numbers need a proper end-of-deal reset, completion accounts are often the safer way to keep the price fair.

That is the real answer here. The cleaner and more predictable the business, the easier locked box becomes. The more volatile or complicated the deal, the more completion accounts earn their keep.

If you’re weighing that up for a sale, acquisition, or investment round, Talk to an ICAEW-regulated Corporate Finance Adviser today.

What to watch for in the SPA before you sign

The SPA is where the pricing method stops being theory and starts becoming real. If the drafting is loose, even a deal that looked tidy in heads of terms can turn messy fast.

This is where you want to slow down and read the small print properly. The main risks are usually simple: unclear numbers, vague dispute steps, and weak protection around value moving out of the business.

Make sure key numbers are defined properly

If you are using completion accounts, the SPA needs to say exactly what counts as cash, debt, working capital, and any other price item. If those terms are fuzzy, both sides can believe they agreed the same thing while still ending up miles apart on the final price.

That sounds basic, but it causes real pain in practice. Does cash include all bank balances, or only unrestricted cash? Is debt limited to borrowings, or does it also catch lease liabilities, accruals, or overdue tax? The answer needs to be plain.

Working capital is the same story. If the SPA does not spell out the calculation method, the reference accounting policies, and any exceptions, you can end up arguing over numbers that were meant to be mechanical.

A good SPA should also deal with:

• what accounting policies apply
• whether historic practice or a fixed policy wins
• which items are included or excluded
• how any estimated figures are later trued up

If the definitions are loose, the argument starts before the accounts even do.

Agree how disputes will be handled

Both pricing methods can cause friction if the numbers are challenged. With completion accounts, the fight is usually about the final accounting statement. With locked box, it is often about whether something counts as leakage.

The SPA should set out who prepares the numbers, when they are reviewed, and how disagreements are resolved. That includes the timetable for raising issues, the response window, and whether an independent expert steps in if the parties cannot agree.

Keep this practical. Nobody wants a process that sounds neat on paper but stalls in the real world. If you are running a deal through a busy finance team, the last thing you need is confusion over who does what, and by when.

A clean dispute process usually does three things well:

1. Sets a clear deadline for the first draft.
2. Gives the other side a proper review period.
3. Explains how unresolved points get pushed to expert determination or another agreed route.

That structure keeps the deal moving. It also stops small accounting points from becoming a full-blown stalemate after completion.

Watch for leakage language in locked box deals

In a locked box transaction, leakage protection is the heart of the SPA. The buyer is relying on the value of the business being preserved between the reference date and completion, so the wording around leakage has to be tight.

The key question is simple, what counts as permitted leakage and what is prohibited? If that line is blurry, you are setting up a dispute before the ink is dry.

Typical problem areas include dividends, management fees, bonuses, asset transfers, repayments to connected parties, and any unusual payments made before completion. Some of those may be allowed if they are expressly listed. Others should be off-limits unless both sides agree in writing.

For sellers, this is not about being boxed in unfairly. It is about knowing the rules in advance and avoiding accidental breaches. For buyers, it is about making sure value does not drip out of the business through the back door.

If the language is doing too much guessing, it needs another pass. That is where deals slip, and that is where Talk to an ICAEW-regulated Corporate Finance Adviser today. can save time, money, and a fair bit of hassle.

A simple way to choose the right structure for your deal

If you strip the jargon away, the choice is pretty straightforward. You are deciding whether the price should be fixed early or adjusted at the end. That is the heart of the matter, and it should be the first thing you look at before getting lost in legal drafting.

For SMEs, the best structure usually comes down to how stable the business is, how much trust sits in the accounts, and how much certainty each side wants. If the figures are tidy and the seller wants a clean break, locked box often fits. If the numbers move around and the buyer wants the price tied to the actual completion position, completion accounts usually make more sense. If you’re weighing that up for a sale, acquisition, or investment round, Talk to an ICAEW-regulated Corporate Finance Adviser today.

Questions to ask before agreeing the pricing method

Before you commit, ask a few blunt questions and answer them honestly. They usually point you to the right structure faster than any long negotiation.

• Does the business have volatile working capital? If cash, debt, stock, or debtor balances swing around, completion accounts often give a fairer result.
• Can you trust the accounts? If the numbers are clean, consistent, and well understood, locked box becomes much easier to defend.
• How long will the deal take? The longer the gap between signing and completion, the more room there is for the business to change.
• Does the seller want certainty or does the buyer want precision? That one question often tells you which side has the stronger preference.
• Is there a real risk of leakage? If the seller might extract value before completion, the locked box wording needs to be tight.
• Will the business keep trading normally? If trading is uneven or seasonal, a fixed historic snapshot may feel too blunt.

A simple test helps here. If you need the final price to mirror the business on completion day, completion accounts are usually the better fit. If both sides want a cleaner, more predictable close, locked box is often the neater route. For deals where working capital is the main pressure point, working capital peg mechanism is the piece that often decides how much comfort the buyer really has.

A quick rule of thumb for SMEs

Keep this in mind and you’ll rarely go far wrong: stable, seller-led deals often suit locked box, while moving numbers or buyer-led deals often suit completion accounts.

That rule works because it reflects what each method is really doing. Locked box gives the seller a fixed outcome. Completion accounts give the buyer a truer picture of what the business was worth at the finish line.

If you want a cleaner memory jog, think of it like this:

• Locked box is better when the business is steady and both sides want certainty.
• Completion accounts is better when the figures move and the buyer wants accuracy.
• The longer the gap, the more completion accounts start to win ground.
• The cleaner the accounts, the easier locked box becomes.

If the deal is calm, fixed and well understood, locked box usually feels smoother. If the deal is moving, messy or heavily dependent on working capital, completion accounts are often safer.

That’s the simple way to read it. Start with the business profile, then look at timing, then decide whether certainty or precision matters more.

Conclusion

The choice between completion accounts and locked box is not about which method is better on paper. It comes down to the business in front of you, the deal timetable, and how much certainty both sides want at the point of signing.

For stable UK deals with clean numbers, locked box often keeps things simpler. For businesses where cash, debt, or working capital can shift, completion accounts give a fairer end result because the final price matches the real position on completion day.

That is the main takeaway for founders and SME owners, the right structure should make the sale feel clearer, fairer, and less stressful. Get that piece right early, and the rest of the deal is far easier to live with.