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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Locked box (leakage)

What is a locked box in an acquisition, and what counts as leakage?

ONE OF 416 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A locked box is a way of pricing an acquisition in which the equity price is fixed from a balance sheet at a past date, the locked box date, and does not adjust at completion. From that date the buyer takes the profits and risks, and the seller promises that no value has passed to it or its related parties, called leakage, beyond agreed permitted leakage such as ordinary salaries; leakage is usually repaid in full. Common in the UK and growing in Australia and New Zealand, where completion accounts have long been usual, it gives a lender a known price and puts weight on the locked box balance sheet.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// THE FULL PAGE

Locked Box: a Worked Example of Price and Leakage →

The price is settled early. The cash still has months to leave.

// WORKED IN

// NEXT TO IT

FACILITIES AND THEIR SHAPE

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