A locked-box mechanism is a purchase price structure where the price is fixed against a balance sheet at a specified date before completion, with no post-completion price adjustment. Between the locked-box date and completion, the seller is restricted from “leakage” (extracting value from the business through dividends, related-party payments, or unusual transactions outside the ordinary course).
Locked-box mechanisms are increasingly used in Australian mid-market deals, particularly auctions and PE-involved processes, because they offer price certainty and a clean exit. They are generally seller-favourable.