Locked Box Leakage Expert Witness UK

In a locked box deal, the purchase price is fixed by reference to a historical balance sheet (the locked box date) rather than the completion date. The seller warrants that no leakage has occurred after the locked box date.

Leakage is value extracted from the target by the seller or related parties between the locked box date and completion, contrary to the leakage provisions in the SPA. It can include dividends, management fees, payments to related parties, and asset transfers.

The expert identifies all transactions between the locked box date and completion, applies the SPA leakage definition to each transaction, distinguishes permitted from non-permitted leakage, and quantifies total non-permitted leakage recoverable from the seller.

Locked box was introduced partly to reduce completion accounts disputes, but it generates its own disputes around leakage. Expert witnesses focus on transaction analysis rather than accounting methodology.