Most Common Working Capital Adjustments

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When a business is sold, sometimes an adjustment to the purchase price is needed to make up any difference between available working capital at the time of closing and the agreed upon working capital target. Justin Thomas of Cohen & Company joined us to discuss some of the most common reasons for working capital adjustments.
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MCM Capital Partners is a Cleveland, Ohio based lower middle market private equity firm focused on partnering with niche manufacturers and value added distributors. We aim to drive value and topline growth at our portfolio companies through deep industry experience, operational expertise and business development support.
www.mcmcapital.com

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2 окт 2024

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@priyanpadayichie9511 3 года назад

Hi, I am currently working on a deal wherein the Target is a restaurant chain and given that sales of the Target are all cash sales, the Target constantly has a negative working capital balance (when excluding cash) and this is mostly due to large Trade Payables. Do you have any thoughts as to how I should treat this? My thinking is to either reduce the purchase price by the value of the negative net working capital balance, or request that the seller ensure that there is enough cash left within the Target, to ensure that the cash balance is equal to the negative working capital balance. Any help will be appreciated.