Working capital and cash consideration in price

It depends on the basis of the price and how it was constructed (base price, base + inventory, base + inventory + Working Capital), which is largely dependent on the size of the transaction and the database used to come up with valuation (see a post and responses: https://www.searchfunder.com/post/why-working-capital-matters-in-your-search-fund-acquisition).

.In the deal size you are referring to, working capital is generally not included. The M&A Source/IBBA Market Pulse four quarter average as of 3Q20 reports that just 21% of deals below $2 million in purchase price included Working Capital, while 79% did not. In the $2 - $5 million range 44% included Working Capital, 56% did not. In the $5 - $50 million range, it shifts to 69% including working capital and 31% excluding it. In any size transaction, cash is usually not included in the price nor transferred to the buyer (even in a stock deal). For those transactions where Working Capital is not included in the price (or acquired explicitly, the lender usually provides a working capital loan in conjunction with the acquisition loan (i.e., you either borrow the WC as part of the acquisition price, or you borrow it explicitly as a working capital loan).

Understand the way Net Working Capital fluctuates throughout the year. Your minimum operating cash should be sufficient to bridge the gap from wherever the cash reserve is today to the maximum NWC investment that the business will need at current operating levels.