True-Up (M&A Glossary)

Summary

A payment made post-closing to adjust for any difference between the purchase price, which was determined on a transaction’s closing date and based on estimated financial metrics, and the actual purchase price determined using financial metrics that become known only after the closing date. In practice, a true-up payment is made to the buyer only if the financial metrics of the target are worse than the parties agreed. The mechanism for determining the true-up, the payment amount, and the source of the true-up funds are all subject to negotiation.