Using the NWC peg as a buyer

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by a searcher from New York University - Leonard N. Stern School of Business
in Grand Rapids, MI, USA

1yr ago

Using the NWC peg as a buyer

QoE came back on a deal I have under LOI as L12M $210k and L3M $350k (increase in AR).

I expect this NWC peg should come off the top of the purchase price, but the seller thinks it's prorated based on months to the end of the year.

With no hypothetical risks on this deal, should I dig in with the seller? I assume so. Looking for experience to guide me.

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reply by an intermediary 1yr ago
from The University of Michigan in Bonita Springs, FL, USA

Agree with Mike, and many times, the NWC isn't easily calculated immediately prior to closing; therefore, a NWC "true-up" is required post transaction. We've also "pegged" ranges to ensure buyer and seller aren't harmed by unexpected fluctuations, Was NWC clearly defined in the LOI and did the QoE contractor use this definition?

reply by an intermediary 1yr ago
from Georgetown University in Delray Beach, FL, USA

Each broker is different with respect to the advice to clients - my starting point for sell-side clients is that a normal level of working capital is included in the price. if you're asking the seller to reduce price by the amount of working capital I'd tell you to pound sand unless you were paying a nice premium.