Locked Box vs Completion Accounts: Which Wins in Polish M&A?

We've seen a continued increase in M&A transactions in Poland over the last year, with 2026 bringing even more. These deals typically use either the 'locked box mechanism' or 'completion accounts mechanism' - two common pricing mechanisms in Polish M&A.
Under the ‘locked box mechanism’, the seller and buyer agree the purchase price payable for the acquisition of the shares in the target company by reference to a set of ‘locked‑box accounts’ prepared as of a defined ‘locked‑box date’ before the SPA is signed. Under this mechanism, there is no post‑completion adjustment of the purchase price.

Under the ‘completion accounts mechanism’, the seller and buyer agree an estimated purchase price based on a set of ‘estimated completion accounts’. The preliminary purchase price is then adjusted following completion of the transaction on the basis of a set of ‘completion accounts’ agreed by the parties. The ‘completion accounts’ may be settled or determined by an independent expert if the parties are unable to agree on them.

The choice between these two pricing mechanisms will generally depend on the nature of the transaction and the relative bargaining power of the buyer and the seller.

Locked box

Under the locked box mechanism, the seller and buyer agree on the purchase price for the target company's shares before signing and completing the share purchase agreement (SPA). This price is calculated using locked box accounts-financial statements prepared as of an agreed locked box date during the financial year, which must be accurate as of that date. These accounts are typically audited year-end statements, recent management accounts, or a balance sheet prepared for a specific reference date within the year.

The mechanism excludes post-completion price adjustments, as the final price relies on the buyer's due diligence into the locked box accounts.

Leakage and permitted leakage

Under the locked box mechanism, the buyer assumes the risk of any potential 'leakage of value' from the target company between the ‘locked box date’ and the completion of the transaction, while the seller retains full control of the company. To protect the buyer against this, the buyer would ordinarily require the seller to give certain undertakings to guard against ‘leakage’ occurring between the ‘locked box date’ and the date of completion. Some examples of ‘leakage’ can typically include the payment of dividends or distributions by the target company to the seller, or the incurring of certain liabilities by the target company in favour of the seller or a seller group company.

Certain ‘ordinary course’ payments that may fall within the definition of ‘leakage’ may properly be considered to be ‘permitted leakage’. Accordingly, the seller and the buyer can agree that any instances of ‘permitted leakage’ should be excluded from the anti-leakage provisions. Instances of ‘permitted leakage’ can include payments required for the ordinary day-to-day running of the target company. Other instances of ‘permitted leakage’ may also include specifically agreed payments that have been provided for in the ‘locked box accounts’, or payments that are already contemplated by both the seller and the buyer when agreeing on the purchase price.

Completion accounts 

Under the completion accounts mechanism, the buyer and seller agree on a purchase price based on a set of ‘estimated completion accounts’ that are specifically prepared for the transaction. The preliminary purchase price is then paid by the buyer to the seller on completion of the transaction. 

Following completion, the preliminary purchase price would be adjusted by reference to ‘final completion accounts’, which are drawn up to the date of completion. The ‘final completion accounts’ are agreed by the seller and buyer as being appropriately reflective of the financial position of the target company on the date of completion, or can be settled/determined by an expert if there is any dispute. 

The ‘final completion accounts’ are typically drawn up in accordance with an agreed methodology that would be specified in the SPA. Examples of these methodologies include:

• adjustments for cash, debt and working capital in the target company, or
• an adjustment for the net assets in the target company

 
Locked box versus completion accounts

The locked box mechanism is generally considered a more seller-friendly mechanism. It can offer price certainty at completion, eliminate complex post-completion calculations, and provide greater cost and time efficiency in its negotiation and implementation. The completion accounts mechanism is generally seen as a more buyer-friendly mechanism. This is primarily due to the fact that it allows for the purchase price to be readjusted to reflect the financial position of the target company on the date of completion. The pricing mechanism agreed by the parties will depend on the nature of the transaction and the bargaining power of the buyer and the seller.

Comments

The ‘completion accounts mechanism’ and ‘locked box mechanism’ offer different advantages and disadvantages to buyers and sellers, which need to be considered in the context of any transaction.

Under the more buyer-friendly ‘completion accounts mechanism’, the seller bears the economic risks associated with the target company until the completion of the transaction. In contrast, under the more seller-friendly ‘locked box mechanism’, the economic risks (and opportunities) associated with the target company transfer to the buyer at the earlier ‘locked box date’, rather than at the date of completion.

Whether you are on the buy side or sell side, it is recommended to use experienced M&A attorneys.