Is a purchase price adjustment common?
Frequency/market practice: Purchase price adjustments are fairly common, especially where sophisticated parties are involved and the size of the deal is substantial.
What type of purchase price adjustment is common (e.g., debt-free, cash-free)?
Frequency/market practice: Adjustments are generally based on net debt or working capital adjustments. However, in some transactions involving Indonesian conglomerates, we have seen that: (i) buyers request that sellers use the debt-free and cash-free mechanism; or (ii) parties agree a locked-box mechanism.
At the same time, we see a locked box purchase price adjustment mechanism gaining traction with sellers.
Is there a collar on the purchase price adjustment?
Frequency/market practice: Rarely; this is generally not acceptable.
Who usually prepares the closing balance sheet (where applicable)?
Frequency/market practice: This is a point of negotiation, given the advantage of being able to instruct the auditor who will prepare the closing balance sheet. We see both options being agreed, depending on the negotiating position of the parties.
Is the balance sheet audited (where applicable)?
Frequency/market practice: Fairly common; in larger transactions, we would typically see this statement being reviewed by an auditor.