During exit negotiations, the buyer is demanding a net working capital peg that feels unfairly high, which would reduce our cash at close. How do we defend our operational cash requirements?

Question

Tyler Smith · Accepted Answer

Buyers use the net working capital peg to ensure they are acquiring a business with enough operational liquidity to run from day one without requiring immediate cash injections. If your working capital fluctuates wildly due to sloppy administrative processes, they will set the target artificially high, which directly reduces your cash at close. To defend your cash, you must prove that your cash conversion cycle is tightly managed, disciplined, and predictable. Use your EOS® Scorecard to track leading indicators like Days Sales Outstanding and Days Payable Outstanding over a trailing twelve-month period. Prove that your working capital needs are optimized through disciplined accounts receivable collections and tight inventory management. If your operations leverage custom AI automated billing workflows that accelerate your collections, present this performance data to show a highly efficient and modern cash cycle. When you can present clean, trended data proving your true operational cash requirements to the buyer's forensic accountants, you prevent them from using a bloated working capital target to re-trade the deal at the goal line.