I'm early in diligence (pre-LOI) with a contractor with 90% revenue coming from public bids. Appx $10M top line with 10-13% adjusted EBITDA margins. A balance sheet from within the last 3 months shows the company holding over $1.8M in cash. This seems high to me, but I'm trying to dig in to determine if that is a reasonable/expected need going forward, as obviously this would dramatically impact the ability to finance the deal.

Specifically, I'm wondering if anyone has experience in determining a conservative amount of operating capital required for companies operating in the public bid market and if so, how I should be thinking about and calculating this (ie-what variables go into this analysis?)