Investment Banking - How To Calculate Net Working Capital for an M&A Transaction - Transact Capital

In this informative presentation, we delve into the world of Net Working Capital, covering three crucial topics that will provide clarity for business owners contemplating a sale of their business. Whether you're a seller or just curious about the intricacies of Net Working Capital, this video is designed to shed light on the subject.
Topic 1: Calculating Net Working Capital
Learn the step-by-step process of calculating Net Working Capital. We break down the elements involved, including adjustments to internal financial statements, and discuss which line items are included in the calculation.
Topic 2: Establishing a Net Working Capital Target
Discover how the Net Working Capital Target is determined, a critical aspect of the seller's obligations at closing. Dive into negotiations around line items and the historical period used to set the target.
Topic 3: Impact on Closing Cash
Explore how Net Working Capital affects the cash received at the day of closing. Understand the concept of "estimated closing Net Working Capital" and how it compares to the established target. Learn how this comparison can affect the purchase price, either increasing or decreasing it.
Remember, Net Working Capital can be complex, and understanding it is crucial in ensuring a smooth business sale. Don't let misunderstandings or disagreements over Net Working Capital derail your deal. Educate yourself and seek expert advice early in the process.
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[@jd5787]

Hi, nice educational video. Thanks for sharing. In the case of negative NWC due to the presence of DRs (common occurrence in tech), how woukd you treat WC calculations and WC Peg? Thanks!