+ 1 on this, and I’d add that how working capital is structured at close is just as critical as ensuring the right amount is there. In many SMB transactions, you’re inheriting: supplier terms that may tighten post-sale, customers who may stretch payments once the founder leaves, and seasonal needs that fluctuate more than diligence models suggest If the buyer doesn’t build in a cushion for post-close behavior change, clear mechanics for true-up and variation, and access to liquidity as growth creates more working capital demand, it creates the same outcome as undercapitalization, just slower. IMO the riskiest moment in a transition isn’t Day 1, it’s Day 120, when you’ve taken over operations but haven’t yet put your balance sheet to work.

In a theoretical sense, no, it should not work like that. In practice, it depends on what you negotiate with the seller, who often don't care about what's theoretically correct.