Many working capital dispute resolution mechanisms consider using a third party to resolve disputes that the parties cannot resolve alone. The third is usually used in one of two roles of arbitrator or expert. The difference is significant: an arbitrator usually asks each party to present their arguments, then selects a “winner”, while an expert usually asks each party to present their arguments, and then arrives at a solution that can incorporate some or all of each party`s positions, as well as the expert`s own ideas. Should a sold business have more or less working capital? As a salesperson, you`ll probably want to have less working capital in the business. Maybe the seller will distribute money to the owners. This requires an increase in working capital just before each cash distribution and then dropping it back to the same level. If the seller drops the working capital to a lower level, perhaps due to too much cash distribution, the seller extracts the value of the store at the buyer`s expense. Target Working Capital The buyer in each M&A transaction wants to have sufficient operational liquidity and negotiates a “target” with the seller. This figure is the amount that the buyer wants to have at the closing table in order to continue its activities and generate revenue. It can be helpful for buyers to find an accurate target working capital by looking at the average net working capital from the same point over the past 6 to 12 months. The repayment of short-term debt should not affect the gross proceeds for the seller. Sometimes the agreement also provides for interest to be charged on unpaid adjustment amounts in order to avoid late payments. Typical post-closing adjustment provisions focus on the target company`s liabilities and assets that fluctuate due to business activity between the time the parties agree on a purchase price and the actual closing of the transaction, which can be months after the initial price agreement….

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