FinanceDeal Structure
Working Capital True-Up
Also known as: Working capital adjustment, WC peg
An adjustment to the purchase price based on the amount of working capital (cash, AR, inventory minus AP) left in the business at closing versus a pre-agreed target.
WHY IT MATTERS
Businesses need working capital to operate. When a buyer acquires a company, they expect the business to come with a "normal" level of working capital — enough to keep running without injection of buyer cash. If actual working capital at closing is above the target, the buyer pays extra; if below, the purchase price is reduced. The trap: the target is negotiated based on historical averages, but buyers and their advisors frequently use aggressive accounting interpretations during diligence and the true-up to reduce the effective purchase price. Post-closing working capital true-ups are one of the most common sources of post-close disputes.