Mike Moore, partner, and Andy Oppenheimer, Business Services Practice Group co-leader, had their “Why Working Capital Pegs Matter for Lower Middle Market Sellers” article published in the March/April issue of Mergers & Acquisitions. The article explains why working capital (WC) pegs have become a high-stakes negotiation point in lower middle-market deals and why sellers may feel that pegs are unfair.
The article walks through common seller pitfalls, including failing to normalize for business-specific issues, overlooking one-time items, and not addressing WC early enough in negotiations. Practical guidance includes pushing for specificity in the letter of intent and modeling out different possible outcomes before closing.
For potential sellers, the takeaway is clear: understand WC issues before negotiating and appreciate how its nuanced aspects can dramatically impact net takeaway proceeds.
Mergers & Acquisitions subscribers can read the full article here.