Yet another working capital question

Some great answers here. What I will add to the above, which is all correct, is that often sellers approach this not maliciously to get more value, but often from a lack of understanding of how M&A and valuations are done in practice. Sellers often think of their business in terms of tangible assets plus way overestimated goodwill. In particular, this AR concept is tough because a seller feels they have earned the right to the money they have generated during their tenure. I see this most often when Seller isn’t getting good sell-side advice

Tagging onto Searchfunder member‌'s comments, I am reminded of the old math property A + B = C, thus C - B = A. When NWC (B) is included in the price (C) the buyer is funding NWC through the acquisition loan. When NWC (B) (particularly AR/AP) is not included in the price (A) or the transaction, then the buyer is funding it with a permanent WC loan and/or LOC (lenders provide these regularly alongside the acquisition loan). When using multiples to determine if the price you are going to offer includes or excludes NWC, users must be aware of the NWC rules of the database. For example, PeerComps includes inventory but excludes AR/AP. DealStats is all over the board and you have to look at the detailed data set (all 199 columns) to determine if your comps include or exclude NWC (in a recent pull I did of 39 manufacturers, only 3 of the 39 included NWC in the calculation). So, just like you wouldn't apply an SDE multiple to EBITDA, you wouldn't apply a multiple that excluded NWC to come up with a price that included it without adding the NWC value to it. A + B = C, thus C - B = A.