Working Capital Adjustment 101
January 20, 2022
by an investor from Harvard University - Harvard Business School in Toronto, ON, Canada
All- As aspiring CEOs, some of you may already be familiar with The Working Capital Adjustment, which is part of substantially every M&A transaction. Yet, speaking more broadly, it is the calculation (and concept) with which most small business owners remain largely unfamiliar.
Without a proper understanding of what the working capital adjustment is, why it's necessary, and ways in which it can be manipulated, business owners risk leaving a lot of money on the table when dealing with a more sophisticated and experienced counterpart.
This week's blog post is meant to educate both buyers and sellers of small and medium sized businesses on this very important concept, one that is almost certainly going to present itself within###-###-#### days after the consummation of an M&A transaction. Link to read or listen to the blog post can be found below.
from Texas A&M University in Dallas, TX, USA
from University of Pennsylvania in Philadelphia, PA, USA
How would you think about treating WIP? This could be something in process of being built in the case of a manufacturing company, or being fulfilled in the case of a distribution company (most relevant where there are long lead times on orders). Have had this come up a few times. Just treat as another part of working capital?