Adjustments typically address working capital, cash, debt, and transaction expenses at closing. The buyer prepares a closing statement, the seller may object, and unresolved items proceed to an independent accountant.
The mechanism is separate from indemnification.
Alternative Names:
Price Adjustment|Closing Adjustment
Why it Matters?
Overlap with indemnification creates double recovery risk, since a liability captured in the working capital adjustment may also breach a representation, and well-drafted agreements expressly bar recovering twice for the same item. Absent that provision the dispute surfaces after both mechanisms are invoked. The independent accountant's determination is also typically binding and limited to disputed line items, which narrows the eventual contest.
Frequently Confused with
Related terms
Frequently asked questions
What creates double recovery risk?
How is that prevented?
