![\"Diagram](\"https:\/\/neviacapital.com\/wp-content\/uploads\/2025\/12\/Cykl-kapitalu-obrotowego-blueyellow_resize-crop-300x168.png\")
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As a business owner, did you know that having control over net working capital, how it is calculated and negotiated as part of the company sale process can potentially bring a significant increase in purchase price? <\/p>\n\n\n\n
NWC adjustment may constitute a significant percent of the company purchase price, and its calculation and negotiations can have a material impact on transaction value. <\/p>\n\n\n\n
In some cases, this impact can exceed 10-20% of the proceeds for Sellers.<\/p>\n\n\n\n
Working Capital is not, as many business owners assume, the amount of cash in company\u2019s bank accounts to operate. It is the difference between a company\u2019s current assets and current liabilities. <\/p>\n\n\n\n
More common in M&A, Net Working Capital (NWC)<\/strong> is equal to:<\/p>\n\n\n\n Current Assets (excluding cash or equivalents) minus Current Liabilities (excluding financial debt) in the business.<\/p><\/p>\n\n\n\n The definition of working capital appears objective, but in M&A, components of working capital are often subjective and defined between the parties during lengthy disputes.<\/p>\n\n\n\n Properly calculating NWC is important in M&A transactions because the buyer must make sure the target company has a sufficient amount of working capital to smoothly continue operations after transaction closing.<\/p>\n\n\n\n Commonly, M&A transactions include working capital as a price adjustment mechanism upon transaction closing, parallel to <\/strong> the Net Debt adjustment.<\/p>\n\n\n\n Otherwise the Seller could be inclined to: <\/p>\n\n\n\n in order to increase cash proceeds from transaction.<\/p>\n\n\n\n Calculating the working capital adjustment mechanism that is acceptable to both parties and clearly defining NWC in the share purchase agreement are crucial steps:<\/p>\n\n\n\n Before launching the company sales process, a qualified financial advisor should perform an analysis including working capital assessment. This calculation may have a strong impact on the final purchase price, as it allows you to: <\/p>\n\n\n\n Businesses can optimize cash flow, improve short-term liquidity, rationally increase accounts payable and thus reduce working capital while preparing to the M&A transaction. However, this must happen several quarters before the transaction to prove and be considered sustainable. <\/p>\n\n\n\n Include a comprehensive definition of working capital in the share purchase agreement to avoid further dispute.<\/p>\n\n\n\n The M&A transaction and both of its Parties benefit from an early preparation for working capital adjustment of the purchase price. When it comes to selling your business, details that seem small and highly \u201caccounting\u201d – type may have a high impact on the amount of cash the Seller gains from a transaction.<\/strong><\/p>\n\n\n\n Details such as NWC adjustment may explode even several months after closing. Therefore, it is worthwhile to:<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" Effective control of net working capital and the proper negotiation of NWC adjustments in an M&A process can increase a company\u2019s sale price by double-digit percentages and protect the seller from costly surprises.<\/p>\n","protected":false},"author":1,"featured_media":9159,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[40],"tags":[85,86,87,88,89],"class_list":["post-9153","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-business-valuation-2","tag-company-sale-2","tag-deal-process-2","tag-due-diligence-2","tag-mergers-acquisitions-ma-2"],"yoast_head":"\nWhy It Affects the Purchase Price<\/strong><\/h2>\n\n\n\n
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NWC Discussions in the M&A Process<\/strong><\/h2>\n\n\n\n
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Negotiating the NWC Adjustment – Guidelines for Sellers<\/strong><\/h2>\n\n\n\n
1. Prepare an early analysis in order to understand working capital needs of your business<\/strong><\/h3>\n\n\n\n
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2. Start operating with lower NWC early <\/strong><\/h3>\n\n\n\n
3. Carefully define Net Working Capital in the SPA<\/strong><\/h3>\n\n\n\n
Conclusion<\/strong><\/h2>\n\n\n\n
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