What does it imply when a transaction is executed on a "cash-free, debt-free" basis?

When a transaction is executed on a "cash-free, debt-free" basis, it implies that the seller is responsible for settling all outstanding debts prior to the closing of the transaction. This means that the value of the business being sold does not include any of its liabilities or excess cash. The seller essentially cleans up their balance sheet by paying off any debts so that the buyer acquires the business without inheriting any financial obligations. This approach allows the buyer to focus solely on the operational aspects of the business, knowing it comes without any encumbrances from previous debts or unnecessary cash reserves. Therefore, the responsibility of ensuring that the balance sheet is free from debt lies entirely with the seller before the transaction is finalized.