Working Capital Not Included

by a searcher from University of California, Santa Barbara

5 months ago

I'm seeing a lot of brokered deals that specifically say that working capital or inventory and receivables are not included. What's up with that?
How do you deal with this? Is it just a matter of adjustment to the price and you'll work it out at the negotiating table or it's something more important to you?

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29 comments

searcher from Grand Valley State University

Brokers on smaller deals try to do some wacky things here - any deal of size or with a credible investment banker isn't going to carve out working capital. You're buying a car because of it's ability to take you somewhere - if it doesn't have gas in the tank, you won't get far. If they insist, just back it out of your purchase price. In any event, what you want to protect against is owners operating outside the ordinary course of business - i.e., paying vendors slowly, collecting cash quickly, not replenishing inventory. There are other ways of protecting against that in your purchase agreement as well. Feel free to reach out if you need a hand.

2 months ago | like reply | 0 likes

searcher from University of Notre Dame

Thanks for the tag ^Searchfunder member‌. Here's a post from a well known business broker on X. He's saying in today's marketing that if you ask for working capital on smaller deals (under $5M), they might move on to other buyers. Usually, only inventory is included, and buyers should bring their own cash to run the business. Granted, this reflects a business broker perspective, but it's a real view out there in the market and one to be ready for. https://x.com/ClintFiore/status/1822820515461124280

4 months ago | like reply | 0 likes

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