Purchase Price Precision: Navigating Adjustments in M&A Agreements

Valuation of a target must account for many factors, and transaction parties want to ensure the price accurately reflects the true value of the business. A purchase price adjustment provision is a mechanism by which the purchase price may be increased or decreased as a result of changes to the target company’s financial condition or other specific factors between signing and closing. The adjustment operates to better reflect the often-changing value of the business in the interim period. Explore common purchase price adjustment mechanisms in this comprehensive practice note covering types of adjustments, key elements, dispute resolution, and potential pitfalls.

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