Anatomy of a Purchase Price Adjustment Provision In M&A Agreements

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A Purchase Price Adjustment (PPA), or sometimes referred to as a working capital adjustment, provision should be carefully drafted considering the specific circumstances of the transaction and target company’s financials.

This reference sheet provides an example purchase price adjustment provision that demonstrates the various mechanics for parties to consider. It also includes key data points from more than 100 deals that closed in 2021 on which SRS Acquiom was engaged as the shareholder representative.

In addition to the example purchase price adjustment provision, below is a list of some of the questions the summary sheet answers:

  • What is the median timing to deliver the final statement?
  • What is the most used accounting methodology?
  • What is the median length of the seller’s review period?
  • What is the median period for “good faith” negotiations?
  • How is the Reviewing Accountant selected?
  • What is the median period for the Reviewing Accountant review?
  • How are fees allocated for the Reviewing Accountant?
  • What percentage of deals use a separate PPA escrow?
  • What is the median size of a PPA escrow?
  • What percentage of deals have a PPA threshold and what is the threshold amount?

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Kip Wallen

Senior Director, Thought Leadership tel:720-452-5364

Kip Wallen is a senior director leading the SRS Acquiom thought leadership practice. He leverages his extensive expertise and SRS Acquiom proprietary data to produce resourceful content regularly utilized by market practitioners. Kip has broad experience in M&A and provides guidance on market standards and trends.

Previously, Kip was a Director with the SRS Acquiom Transactional Group, where he collaborated with clients and counsel to negotiate M&A documents including purchase, escrow, payments, and other transactional agreements. Before joining SRS Acquiom, Kip was an attorney with a Denver-based boutique business law firm where he assisted clients with M&A transactions as well as general corporate governance and securities matters.

Kip is an avid supporter of the Colorado Symphony, serving on the Associate Board and Colorado Symphony Fund Board, and the Colorado Rockies. He is an active participant on the American Bar Association’s M&A Committee. In 2016, Kip completed Leadership 20 with the Denver chapter of the Association for Corporate Growth.

Kip received his J.D. from the Sturm College of Law at the University of Denver and an M.S. in Economics, B.S. in Economics and B.A. in International Relations from Lehigh University. He is a member of the Colorado bar.

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