In many South African M&A transactions, the purchase price follows a "cash-free, debt-free" framework, with potential adjustments based on closing date working capital. If the closing accounts yield more cash/working capital, the seller gains; conversely, declining working capital or increased debt means the seller covers the deficit. Parties can set a floor and ceiling limit on the purchase price.
An alternative is the "Lock Box" approach, common in European deals. Here, the purchase price is fixed with certainty at signing, and the seller manages the business for the buyer's benefit until closing.
Before opting for the "Locked Box Mechanism" over the conventional "Closing Accounts Mechanism" in M&A deals, it is advisable to ensure its suitability for the transaction and support it with relevant warranties, indemnities, and security.