Decoding Working Capital: An Overlooked Factor in M&A Transactions

When selling a business, the price that a buyer is willing to pay includes all of the assets and certain liabilities of the company, including machinery and equipment, customer and supplier contracts, lease agreements, and goodwill. The purchase price also includes a certain level of working capital required to operate the business. This is why working capital analysis is a key value component and piece of financial due diligence when selling a business. Business owners typically keep a close eye on working capital during normal operations, and during a sale process, it is no less important to monitor trends to avoid unwanted adjustments to the purchase price. In this article, we will discuss how to analyze historical working capital and considerations for M&A transactions.

Read More…