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Working capital adjustment

Also known as Net working capital adjustment, NWC adjustment, Working capital peg, Working capital target, Working capital true-up

A working capital adjustment is a change to the final price paid for a business at completion, based on the amount of everyday operating money (stock, unpaid customer invoices and unpaid supplier bills) left in the business on the day of sale compared with an agreed normal level. Hand the business over with less than the agreed level and the price is reduced; hand it over with more and the price is increased.

Why it matters at exit

The headline price in an offer is rarely the exact figure that reaches your bank account. Most deals are done on a cash-free, debt-free basis, so the buyer expects to inherit a normal level of working capital to keep trading from day one, and sets that target from your recent history (often a twelve-month average). Running down stock, delaying supplier payments or pulling cash out just before completion can all trigger a downward adjustment worth tens of thousands of euros. Clean, consistent working capital and reliable monthly accounts make the target easier to agree and the final settlement harder to dispute.

Relates to the Mill Financial Clarity →

Frequently asked questions

Does the working capital adjustment change the price I was offered?
Yes. The offer sets a headline value, but the completion price moves up or down depending on how much working capital is in the business on the day of sale compared with the agreed target. The adjustment is usually euro-for-euro against the difference, so it can add to or subtract from your proceeds.
Can I take the spare cash out of the business before I sell?
In a typical cash-free, debt-free sale you usually keep any surplus cash, but you still have to leave the agreed level of working capital behind. Trying to flatter the figure by delaying supplier payments or letting stock run low tends to backfire, because buyers check the trend and will either reset the target or raise a dispute at completion.

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