How accurate was your QoE for NWC?

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June 10, 2025

by a searcher from The University of Arizona - Eller College of Management in Gilbert, AZ, USA

About finished with my QoE and have a recommended NWC number. It is double what the seller recommended and I truly think they believe it. Knowing these formulas are pretty standard, how did yours turn out? Share your industry if you can please.
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Reply by a professional
in Bergamo, Province of Bergamo, Italy
I normally use the average net working capital over the last 24 months as a proxy for the amount of NWC required at deal closing.
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Reply by a searcher
from The University of Chicago in Nashville, TN, USA
I had a similar issue with my current deal, my estimate was twice that of the Seller. I used the traditional average AR + Inventory - AP. The Seller believes that it was overstated in QBO. We are now going with a mechanism where the Seller keeps AR but they leave cash worth their AR estimate and an additional ~15% of the purchase price is held back in escrow but every dollar of cash I receive in the first 8 weeks will release a dollar from the escrow to them at the end of the period. If he is right he doesn't leave anything beyond his current estimate, if I'm right, I will receive the amount I estimated, and maybe more. We looked at other project by project estimates but I lean heavily towards a simple to understand process that will limit disagreements after close. Happy to discuss.
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