Purchase price adjustment Transaction
Definition
A change to the purchase price of a business typically brought on by a mutually agreed upon change in the target business' financials.
Comments
Purchase price adjustments are typically downward and brought by the buyer.
For example, if a buyer offers a seller 6x the current year's EBITDA for a business, (let's say $1 million), but can convince the seller that EBITDA is really $900K, due to underestimates in certain operating costs by $100K, the buyer can reduce the purchase price by $600K (6 x $100K) without modifying the original offer of 6x EBITDA.For profiles of 1,400+ private equity firms, including portfolio and professional info, please consider a free 30-day trial membership.
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