Working capital and cash consideration in price

by a searcher from Northwestern University - Kellogg School of Management

4 years ago

I'm looking at submitting an LOI for a small (<1.5M revenue) manufacturing company. This is my first rodeo, so I'm looking for some crowdsourced knowledge about WC/cash treatment. Inventory will stay with the business and is included in the purchase price, but the cash won't.

That makes sense to me, since it's the prior owner who made that revenue. Question is: is that typically how it works? And would the price offered (multiple of SDE) be adjusted in any way for the low 6-figures of cash the owner will keep?

3 likes
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7 comments

searcher

As with anything in a deal, it just depends on what you and the seller agree on. It is all about how you pitch things to the seller and how it benefits them and they get something that is of value for them.

2 months ago | like reply | 0 likes

searcher from Ivey Business School at Western University

Look up WC pegs, assuming you are doing a share deal or an average WC figure that you will want the seller to deliver to you on closing.

7 months ago | like reply | 0 likes

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