The buyer's Quality of Earnings report is clean, but they are now using minor net working capital fluctuations during the LOI-to-close window to demand a post-closing purchase price adjustment. How do we hold our ground using our operating cash flow data?

Question

Tyler Smith · Accepted Answer

It is common for buyers to use minor net working capital fluctuations during the LOI-to-close period to squeeze a lower price out of the seller. They may claim a working capital shortfall requires a dollar-for-dollar reduction in the purchase price. To defend your deal value, you must use your operating cash flow data to prove these fluctuations are normal and seasonal.

Use the capitalization of cash flows method under standard valuation approaches to show that your net working capital is healthy. Your weekly EOS Scorecard is your best weapon here. Show the buyer thirteen weeks of historical data on accounts receivable, accounts payable, and inventory levels.

This real-time data proves that your working capital levels are consistent with past operations and do not represent a decline in performance. Work with your advisory team to establish a fair working capital peg based on a trailing twelve-month average, rather than a single point in time.

If you have automated your collection workflows, show how this has structurally reduced your cash conversion cycle. This operational efficiency justifies a lower working capital peg, leaving more cash in your pocket at closing. Do not let the buyer's accountants use standard due diligence tactics to chip away at your hard-earned enterprise value.