Scott Bleier – M&A Transactions – Working Capital Adjustment

In this week’s video, M&A attorney Scott Bleier explains why working capital is a vital piece of the M&A transaction. What is working capital? In its simplest definition, working capital is current assets over current liabilities. Buyers want to buy a business with enough working capital to keep this going without an immediate need for a cash infusion. Sellers, conversely, don’t want to sell the business with too much working capital or cash — as they want to realize as much profit as possible. So how do you negotiate a target working capital amount for 2 or 3 months? And what happens when disputes arise over the working capital post-closing?