Be Wary Of The Working Capital Adjustment In A Business Sale Transaction
Buyers of businesses typically will require the Seller to leave a negotiated amount of working capital in the business at the date of sale to support its current operations. One post-closing contractual mechanism that will ensure the buyer receives adequate working capital is commonly referred to as the "Working Capital Adjustment." Working Capital Adjustments are often subject to post closing disputes. An improperly drafted Working Capital Adjustment may obligate the Seller to pay the buyer a material amount of money after closing.
One of the drivers of Working Capital Adjustment disputes is a lack of attention paid by the Seller's various advisors to the details of drafting or reacting to proposed Working Capital Adjustment contractual language. An article titled The Well-Adjusted Purchase Price Adjustment written by Kirkland and Ellis LLP is an excellent source of information on drafting effective Working Capital Adjustment language in a Purchase and Sale Agreement.
Business owners, make sure you speak at length with your merger and acquisition, accounting and legal advisors about the Working Capital Adjustment the buyer proposes when you sell your business.
One of the drivers of Working Capital Adjustment disputes is a lack of attention paid by the Seller's various advisors to the details of drafting or reacting to proposed Working Capital Adjustment contractual language. An article titled The Well-Adjusted Purchase Price Adjustment written by Kirkland and Ellis LLP is an excellent source of information on drafting effective Working Capital Adjustment language in a Purchase and Sale Agreement.
Business owners, make sure you speak at length with your merger and acquisition, accounting and legal advisors about the Working Capital Adjustment the buyer proposes when you sell your business.
Posted by MergerMaven at 7/13/2010 8:02 AM 
Categories: Advice
Tags: merger working capital adjustment buyers of businesses merger and acquisition business owners business sale sell your business post closing
Categories: Advice
Tags: merger working capital adjustment buyers of businesses merger and acquisition business owners business sale sell your business post closing
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