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 will likely change. The net working capital balance on the close date is considered delivered NWC. If target NWC is greater than delivered NWC< then the seller has to pay the buyer. If target NWC is less than delivered NWC, then the buyer has to pay the seller.
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