Purchase Price Adjustment

Posted in Marketing and Strategy Terms, Total Reads: 400

Definition: Purchase Price Adjustment

Purchase Price Adjustments tells the changes in the value of an asset especially the change that happened between negotiation and closing the deal.

It is not included in the gross income since it is not final. The adjustment is just changing the purchase price. Moreover price adjustment has to happen between buyer and seller only. Third person can’t be involved. It is quite common to have this adjustment while purchasing a private property. Buyers generally want the target company to be delivered at closing with a preset balanced sheet so that the final price does not exceed the negotiated price.

The purchase price adjustment should be designed in a such a way that the seller is motivated to get engaged in the business from signing the acquisition agreement to closing the agreement . It should be in the long term interests of the buyer rather than the short term interests of the seller.


X purchased property from Y for INR 50,000. At closing, X paid INR10,000 to Y and executed a promissory note payable to "Y" for INR 40,000. Following the closing, X approached Y, upset that the property was in fact worth only INR 42,000. After a few weeks of negotiations, the parties agreed to reduce the amount of the promissory note to INR 32,000.



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