Implications of seller intention to take earnings up to close

by a searcher from Texas Tech University

1 month ago

I am working on a deal and I am learning that one of the seller's request is "I plan to take any earnings up to the close meaning if it is billed prior to the close those receivables will come back to me not the Buyer." This an IT services company.

I would like to hear some thoughts on the implications of accepting this clause as a buyer.

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30 comments

intermediary from Rochester Institute of Technology

I find that with small deals and unsophisticated sellers, it's much easier to do a deal with a target NWC of $1 and let them keep receivables and pay payables, and you just work your WC needs into the price. Rather than trying to explain to them how w/c pegs work.

1 month ago | like reply | 3 likes

searcher from University of Toronto - Joseph L. Rotman School of Management

Setting a NWC capital peg and post deal 90 day adjustment is the best way forward.

1 month ago | like reply | 0 likes

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