The ticker is the seller's only payment for the cash the business generates after the box date, and the usual rate pays for two thirds of it.
A locked box ticker is equity value multiplied by an annual rate and by the days from the locked box date to completion, divided by 365. On an illustrative equity value of 80.0 million at 5.0 per cent, a 90-day gap produces a ticker of 986,301, while the business generates 1,479,452 of free cash for the buyer over the same days. The rate that pays the seller for the cash the box actually earns is 7.5 per cent: free cash flow to equity divided by equity value.
Worked in full in Closing the Deal by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
In a locked box deal the price is fixed on a balance sheet at a past date, and from that date the economics belong to the buyer. Every euro of cash the business makes between the box date and completion ends up in the buyer's hands. The ticker is the seller's payment for that period, and it is usually set as a round interest rate with little reference to what the business earns. The arithmetic is short, which is why the rate tends to be conceded rather than calculated.
| Input | Value |
|---|---|
| Enterprise value agreed | 104,000,000 |
| Net debt and debt-like items at the box date | 24,000,000 |
| Equity value fixed at the box date | 80,000,000 |
| Locked box date | 31 Dec 2025 |
| Expected completion | 31 Mar 2026 |
| Days in the box | 90 |
| Ticker rate offered by the buyer, a year | 5.0% |
Ticker = equity value × rate × days from box date to completion ÷ 365
In Excel: =EquityValue*Rate*(CompletionDate-BoxDate)/365. Many agreements state the result as a daily amount instead, here =80000000*5%/365, or 10,959 a day, which avoids any argument about day count.
On the inputs above: 80,000,000 × 5.0% × 90 ÷ 365 = 986,301. That is what the seller receives on top of the locked box price if completion happens on 31 March.
The ticker only makes sense against the cash the business generates for the owner of its equity in the same period. Start from EBITDA and take out everything that leaves the business before cash reaches the shareholder.
| Line | Euros a year |
|---|---|
| EBITDA | 12,000,000 |
| Less maintenance and committed capex | −2,500,000 |
| Less cash tax | −1,800,000 |
| Less interest on the 24.0 million of net debt | −1,700,000 |
| Free cash flow to equity | 6,000,000 |
That is 16,438 a day, or 1,479,452 across the 90 days. The ticker of 986,301 pays the seller for 66.7 per cent of it. The other 493,151 stays with the buyer, about 164,384 for every month the deal takes to close.
The matching rate is the free cash flow to equity divided by the equity value: 6,000,000 ÷ 80,000,000 = 7.5 per cent. At that rate the ticker over 90 days is exactly 1,479,452 and the seller is paid for the period it no longer owns. This is the number to put on the table before anyone proposes a rate that merely sounds like interest.
Seasonality matters too. The 7.5 per cent is an annual average. If the quarter between the box date and completion is the target's strongest or weakest, the box earns more or less than a quarter of the year's cash, and the matching daily amount moves with it. Use the cash flow of the actual months in the box, not the annual figure divided by four.
| Days in the box | Ticker at 5.0% | Cash earned | Kept by the buyer |
|---|---|---|---|
| 60 | 657,534 | 986,301 | 328,767 |
| 90 | 986,301 | 1,479,452 | 493,151 |
| 120 | 1,315,068 | 1,972,603 | 657,534 |
| 180 | 1,972,603 | 2,958,904 | 986,301 |
The shortfall grows in a straight line with time. A regulatory or merger control delay that pushes completion to 180 days costs the seller 986,301, the same amount as the whole ticker in the base case. The buyer, which controls much of the timetable through its own approvals and financing, has no cost of delay at all while the rate is below 7.5 per cent: a slow completion makes it richer.
| Ticker rate | Ticker | Kept by the buyer |
|---|---|---|
| 3.0% | 591,781 | 887,671 |
| 5.0% | 986,301 | 493,151 |
| 7.5% | 1,479,452 | 0 |
| 10.0% | 1,972,603 | −493,151 |
Calculate the ticker as equity value × rate × days ÷ 365, then test the rate against the target's own free cash flow to equity. On this deal 5.0 per cent pays for two thirds of what the box earns, and the gap widens with every day of delay. The locked box and completion accounts workbooks in the free companion files for Closing the Deal run the same comparison on identical terms, and the earn-out article shows the other place where a price fixed on paper moves after signing.
On equity value, the price for the shares fixed at the locked box date. The cash the business generates after that date accrues to the buyer as owner of the equity, so the ticker compensates the equity. Running an illustrative 5.0 per cent on an enterprise value of 104.0 million instead of 80.0 million overstates a 90-day ticker by 295,890, about 30 per cent.
There is no market rate to look up: the defensible rate is the target's free cash flow to equity divided by the equity value. A business generating 6.0 million a year after capex, tax and interest on an 80.0 million equity value earns 7.5 per cent, so a 5.0 per cent ticker leaves 493,151 of a 90-day period's cash with the buyer. Rates are a negotiated, illustrative figure in every deal.
From the locked box date, because that is when the economic risk and reward pass to the buyer. Running it from signing loses the seller every day between the accounts date and signature. On a 90-day gap at 10,959 a day the ticker is 986,301; starting the clock 31 days later at signing cuts it by roughly a third.
This article is one calculation from Closing the Deal. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
Get the book on Amazon →Free companion files
Also on Amazon UK · Amazon Germany · Amazon France · Amazon Canada
Reading guide: corporate finance, valuation and markets → · All 324 articles →
If this book helped, or didn’t, a few lines on Amazon are worth more than they look: they are what the next reader goes on. Write a review. The workbook stays free either way.