Are You Getting the Price You Agreed On? The Invisible Value Leakage in M&A
Many business owners and executives assume that once a price is agreed during a sale process, the deal is essentially done. The reality, however, is often different.
In a significant share of M&A (mergers and acquisitions) transactions, 10–20% of the total value can erode between signing and closing. What’s more, this loss rarely stems from a deterioration in the business’s performance; it arises from an insufficient understanding of the deal structure, the contractual details, and the underlying financial mechanisms.
As a result, the gap between the “agreed price” and the “cash in the bank” can be far wider than expected.
Where and How Is Value Lost?
In M&A, value leakage is generally neither obvious nor visible. On the contrary, it occurs quietly, within the technical details.
1. Working Capital Traps
Buyers typically define a “normalized” level of working capital. But when this level is set artificially high, the seller is forced to leave more cash in the business at closing than anticipated.
Even if the headline price appears unchanged, this directly reduces the net amount the seller actually receives.
2. The Pricing Mechanism: Locked Box vs. Completion Accounts
How the price is determined is at least as critical as the price itself.
- In the Locked Box model, the price is fixed to a historical date, and any value created thereafter belongs to the seller.
In the Completion Accounts model, the price is recalculated based on the financials at the moment of closing. - Both approaches carry their own advantages and risks. A poorly structured mechanism, however, can lead to serious value loss.
3. “Debt-like” Items During the transaction, certain items may be reclassified:
- Deferred expenses
- Management bonuses
- Tax liabilities
- Provisions and obligations
- Such items are frequently treated as “debt-like” and deducted directly from the company’s value.
- Sellers often realize the magnitude of these effects only in the later stages of the process.
4. Negotiation Pressure and “Deal Fatigue” The longer a process drags on, the greater the fatigue. Both parties want to close, and the pressure of momentum builds.
At this point, sellers may:
- Approve clauses that seem minor but carry significant impact
- Make concessions whose financial effect has not been fully analyzed
- Make decisions driven by a “let’s just get it done” mindset
- The result: changes that look small on paper can cause serious erosion in total value.
The Truth: Valuation Is Only the Beginning A company’s valuation is merely the first step in the process.
The factors that determine the real outcome are:
- How the deal structure is designed
- How the contractual clauses are drafted
- How clearly the financial definitions are set
- How disciplined the negotiations are
- How well the process is managed through to closing
In other words, what matters is not the “agreed price,” but the “net cash realized.”
How Does Anatrica Partners Add Value in This Process?
At Anatrica Partners, our focus is on protecting value at every stage of the transaction. - Designing the deal structure correctly
- Clarifying critical financial items
- Optimizing the pricing mechanism
- Taking a value-driven approach in negotiations
- Closely monitoring closing adjustments
- Our goal is simple: to minimize the gap between the price you agreed on and the cash you ultimately receive.
Final Word
Entering a sale process focused on valuation alone is not enough.
The truly critical question is this: how much of that value will you actually be able to realize?
If you are evaluating a sale process, understanding in advance where value leakage can occur—and preparing accordingly—directly shapes the transaction outcome.
A properly structured and well-managed process can make a difference of millions of euros.
