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Completion Accounts

Completion Accounts settle the final price paid on closing a sale/acquisition. Our attention to detail in drawing up Completion Accounts can avoid disputes and potentially result in extra monies being paid to you. 

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APPRECIATING THE IMPORTANCE OF COMPLETION ACCOUNTS 

Completion Accounts for a sale/acquisition should follow the process set out in the Share Purchase Agreement for adjusting the difference between the figures agreed before completion and the actual figures following completion. That difference can amount to a sizable amount – either being repaid by the seller or paid as a top-up by the buyer. As there are often large sums at stake, it’s surprising that not everyone pays close attention to their Completion Accounts or sometimes don’t request them at all. 

At John Daly Associates (JDA) we have extensive experience of Completion Accounts and take painstaking care over them, with a particular focus on closing accruals and costs incurred between the effective date and completion of the transaction. 

DETERMINING THE SHARE PURCHASE AGREEMENT 

The Share Purchase Agreement (SPA) is a crucial step that must be negotiated and finalised before the Completion Accounts can be started. It sets out the accounting policies to be used in the Completion Accounts. These have to be agreed by both parties at this stage, as they will determine the final value of the business and whether that results in you making more from your sale or paying less for your acquisition. 

It’s vital that if your sale or purchase is to go ahead smoothly, both sets of accountants and lawyers communicate openly and freely with each other. The SPA needs to nail down all the possible contentious areas, including the basis of any final price adjustments, which are usually focused on working capital, net assets adjustment or net current assets adjustment. 

AREAS FOR NEGOTIATION 

Our services for you depends on whether you are buying or selling. If you’re selling, we’ll check before you close the sale that all your documentation and decision-making relating to the draft completion balance sheet is agreed by your management team. Any dissent after closing can prove difficult to resolve, as the draft completion balance sheet estimates the final purchase price adjustment for both you and the buyer (and gives you a clear indication of the likely proceeds).  

If you’re the buyer, the completion accounts will give you a clearer view of your proposed purchase. We’ll go through them with you and highlight any areas of concern or that reveal something unexpected, perhaps because you had limited access for due diligence. This requires a considered response; the scope of the final price adjustments may be sufficient to accommodate any unwelcome surprises or you might feel you have to raise a dispute – although we would make sure you’re fully aware of the likely delays and cost. 

OUR ROLE FOR YOU 

As experienced finance professionals, our Associates have been involved in many high value transactions, including Completion Accounts. Completion Accounts are not regulated by the legislation that applies to statutory company accounts, but we ensure our work meets the requirements of the International Financial Reporting Standards (IFRS).  

We’ll review the accounting procedures and principles to be used in the Completion Accounts as mentioned above, and confirm other aspects such as debtors or creditors and any directors’ loans. The SPA should also include a statement on how to settle a dispute. This might arise from the figures in the accounts, in which case it may be necessary to bring in an independent accountant.  

MEETING DEADLINES 

We appreciate that deadlines are critical in Completion Accounts; if one of the parties misses a deadline, it’s deemed to mean that they have accepted the drafts. Consequently, we’ll work hard to ensure you are able to meet all your deadlines. This involves close liaison with other advisors, particularly the lawyers, on a range of key aspects from setting out the time limits for each stage, to the target figures, the included or excluded assets or liabilities, the accounting policies to be used and the limits of the final price adjustment. 

Missing deadlines is critical. It might be possible to negotiate a new deadline with the other party if they believe it’s in their interests too. If they’re not willing to do this, you can tell them you intend to take action – but we recommend that negotiation is the preferable option, to avoid the further delay and expense of a dispute. 

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