Liquidating net working capital 5stepstoonlinedating
As a result, the buyer would end up with less future cash flow than it had bargained for.
It’s possible to change the mix of current assets and liabilities without affecting income and EBITDA so that a seller could maintain its EBITDA but not deliver the promised mix.
The buyer then would face higher-than-expected obligations when it takes over.
Working-capital hurdles provide protection and benefits to both parties of a transaction.
A working-capital hurdle also will help the buyer deal with less egregious issues that can affect a deal’s bottom line.
Consider, for example, a target company that does not maintain an accounts-receivable allowance for bad debt.