Boxing Clever: Explaining UK and US Private Equity Locked Box Perspectives

25 Pages Posted: 27 Sep 2022 Last revised: 28 Nov 2022

See all articles by Bobby V. Reddy

Bobby V. Reddy

Faculty of Law, University of Cambridge

Date Written: September 22, 2022


A seller’s market has developed in private company M&A on both sides of the Atlantic. The approach to pricing mechanisms, though, has diverged significantly. While US acquisitions customarily implement post-closing adjustments to correct for deviations from the target’s expected financial condition as at completion, it is common in the UK, particularly in the private equity sphere, to fix an acquisition’s price based upon historic accounts – locked box mechanisms. This article analyses the risk theories underpinning locked box mechanisms and post-completion adjustments, and applies them to other deal protection measures, including material adverse change, warranties, representations, escrows and earn-outs, with a view to rationalising the differing path dependencies of UK and US M&A pricing mechanisms. Although differences between UK and US risk allocation ideologies seem to explain the pricing mechanism approaches, when evaluated more carefully, for US private equity sellers the status quo is not as logical as it first appears.

Keywords: Mergers and Acquisitions, M&A, Locked Box, Private Equity, Post-Closing Adjustments, Completion Accounts, Material Adverse Change, Warranties

JEL Classification: D81, G11, G32, G34, K22, K20

Suggested Citation

Reddy, Bobby, Boxing Clever: Explaining UK and US Private Equity Locked Box Perspectives (September 22, 2022). University of Cambridge Faculty of Law Research Paper No. 12/2022, The Company Lawyer Forthcoming, Available at SSRN: or

Bobby Reddy (Contact Author)

Faculty of Law, University of Cambridge ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

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