Does the buyer want a lower or higher target working capital in the purchase agreement?
The buyer wants the target NWC balance to be as high as possible. The buyer will often try to take the high point of the NWC balance over the last 12 months or even forecast a higher NWC than has historically been achieved if the business is growing. The reason is that the buyer wants the target NWC to be greater than delivered NWC because the seller has to pay the buyer the difference.
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Does the buyer want delivered NWC to be higher or lower than the target NWC in the purchase agreement?
The buyer wants delivered NWC to be lower than target NWC in the purchase agreement. If the seller delivers NWC that is higher than the target NWC in the purchase agreement, the buyer owes the seller for the difference. If the seller delivers NWC that is lower than the target, the seller owes the buyer.
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What is the difference between target NWC and delivered NWC?
Target net working capital (“NWC”) is the figure that the buyer and seller agree on and is included in the purchase agreement. The purchase agreement is signed when to make the deal official, however, the transaction doesn’t close until a later date. The close date an sometimes be 3 months later, so net working capital...
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How to calculate Net Working Capital (NWC)?
Teaches you how to calculate net working capital.
Does the buyer want delivered NWC to be higher or lower than the target NWC in the purchase agreement?
The buyer wants delivered NWC to be lower than target NWC in the purchase agreement. If the seller delivers NWC that is higher than the target NWC in the purchase agreement, the buyer owes the seller for the difference. If the seller delivers NWC that is lower than the target, the seller owes the buyer.
What is the difference between target NWC and delivered NWC?
Target net working capital (“NWC”) is the figure that the buyer and seller agree on and is included in the purchase agreement. The purchase agreement is signed when to make the deal official, however, the transaction doesn’t close until a later date. The close date an sometimes be 3 months later, so net working capital...
How to calculate Net Working Capital (NWC)?
Teaches you how to calculate net working capital.
