The buyer wants to deduct our outstanding supplier disputes and pending warranty claims dollar-for-dollar from our cash at close, claiming these represent post-closing liabilities. How do we negotiate a more equitable treatment of these operating liabilities?

Question

Tyler Smith · Accepted Answer

Buyers often try to treat any unresolved operational dispute as a direct reduction of cash at close, which is a double penalty if those same liabilities are already factored into your Net Working Capital peg. To protect your proceeds, you must draw a sharp line between normal operating liabilities and extraordinary debt-like items.

Supplier disputes and warranty claims are a standard part of doing business and should be handled through the normal working capital adjustment mechanism, not as dollar-for-dollar purchase price reductions. You should negotiate a specific cap on warranty liabilities, backed by your historical claim data. Show the buyer that your warranty claims have historically averaged a very low percentage of revenue, and agree to set up a limited, post-closing escrow account dedicated solely to these claims, rather than taking an upfront hit. This escrow should have a strict twelve-month survival period, after which any remaining funds are automatically released to you.

In the EOS framework, we handle issues like supplier disputes transparently by tracking them on our weekly Issues List. By showing the buyer that you have a systemized, operational process for tracking, resolving, and closing out these disputes, you demonstrate that they do not represent an unquantified risk. This operational clarity defeats their attempt to treat standard business friction as a discount on your hard-earned equity.