The buyer is proposing a cash-free, debt-free deal but wants to exclude our aging accounts receivable from the Net Working Capital calculation while keeping the right to collect those funds post-close. How do we prevent this double-dipping from draining our cash balance at closing?

Question

Tyler Smith · Accepted Answer

Buyers often try to pull a double-dip maneuver during working capital peg negotiations. They will argue for a cash-free, debt-free deal structure, which means you keep your cash and pay off your debt. But then they will try to exclude your accounts receivable from the Net Working Capital calculation, claiming those receivables are unpredictable or aged.

If you agree to this, you are effectively giving the buyer your future cash. They will collect on those receivables post-closing without paying you a dime for them, while your working capital peg remains artificially high. This forces you to leave extra cash in the business to cover the gap.

To block this double-dip, you must insist that accounts receivable are included in the Net Working Capital calculation at their net realizable value. This means you apply a standard allowance for doubtful accounts based on your historical collection rates.

Use your weekly Level 10 Meeting scorecard data to prove your collection history. If your scorecard shows that your days sales outstanding is consistently low and your write-off rate is under one percent, the buyer has zero justification for excluding these assets.

If they still refuse, demand that any collected receivables that were excluded from the peg be paid back to you on a dollar-for-dollar basis as they are collected post-close. This keeps the transaction clean and protects your cash at closing.