I am looking at a deal now where the EBITDA is ~$1.5M on $15M of revenue but the AR is almost $5M and AP is only $1M. Almost no historical bad debt, just a consistently longer collections cycle. There's also about $2M of inventory. I was planning to offer 4x EBITDA which is above industry average for this space and include inventory in that, but not sure if it's realistic to expect an AR/AP NWC peg to be included as well given it's another $3M. However, without the AR, it would be nearly impossible to make the deal work and have the cash to operate the business.

If others have encountered this situation and have ideas for how to structure the deal, would appreciate any ideas!