Inventory Purchase Price Adjustment Clause

Summary

This inventory purchase price adjustment clause provides for a post-closing adjustment to the purchase price based on the value of inventory in a private company asset purchase. This clause includes practical guidance, drafting notes, and an alternate clause. Parties in private M&A transactions often include purchase price adjustments to account for changes to the target company's financial condition or certain specified accounts between signing and closing. While not the most common purchase price adjustment mechanism, parties might desire to include an inventory purchase price adjustment depending on the specifics of the transaction. For a sample life sciences purchase price inventory adjustment, see Life Sciences Purchase Price Inventory Adjustment Clause. This model clause provides for a post-closing inventory purchase price adjustment, in which seller provides an estimated closing inventory calculation to buyer prior to the closing. Buyer then has the opportunity to review seller's calculation and access seller's books and records in order to verify whether it agrees with seller's inventory calculation. The parties are then to work in good faith to resolve any disputes related to the estimated closing inventory calculation prior to the closing. After the closing, buyer has a certain number of days to raise objections and set forth its own closing inventory calculation. If the parties cannot agree to a closing inventory amount, they can refer their disputes to an independent accounting firm for final resolution of the inventory purchase price adjustment calculation. For further discussion of purchase price adjustments, see Purchase Price Adjustment Provisions in M&A Transaction Documents.