Deal Terms and Adjustments

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May 24, 2024

by a searcher from Stanford University - Graduate School of Business in Dallas, TX, USA

What are your experiences with working capital adjustments or CapEx post-close, and how have they affected the final deal terms?

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Reply by a searcher
from Texas A&M University in Denver, CO, USA
Hey Jory - hope all is well. We should catch up soon.

1.) NWC is always a contentious conversation, best communicated in full within or right after LOI acceptance.
2.) Final NWC often fluctuates as diligence plays out. It almost always goes up as diligence proceeds, often an adjustment up from initial scope.
3.) I've never heard of a buyer having a glut of NWC... all buyers I know had "just barely enough", had to pull on a LOC, or were woefully short on cashflow during the first few months of operating.
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Reply by a searcher
from Arizona State University in Phoenix, AZ, USA
The 'target' or 'peg' NWC is estimated and agreed upon for the purposes of closing and is factored into the purchase price. After closing, this is trued up with a post-close adjustment, up to 120 days post close where the buyer or seller is made whole depending on the result of the reconciliation.
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