The Importance of Net Working Capital in M&A Deals
Net working capital is super important in mergers and acquisitions (M&A) transactions. It’s the diff between a company’s current assets and its current liabilities. When a company gets acquired, the amount of net working capital it has can really affect the final purchase price and how the deal goes down.
Why Net Working Capital Matters
Buyers want the company they’re getting to have a good amount of net working capital. This means the business has enough money to pay its short-term bills. But sellers might want to keep more of that cash when they sell. Knowing how net working capital works can make a big difference in the negotiation and the deal itself.
Stuff that Affects Net Working Capital in M&A
Lots of things can change how much net working capital a company has, like what industry it’s in, how its business changes over the year, and its operating cycle. When a company is getting bought, both the buyer and the seller need to look at the past and future of the net working capital to know how healthy the business is.
How to Deal with Net Working Capital in M&A
First, you have to look real hard at the business before you buy it. Then, when you’re setting the final deal, you have to figure out if the net working capital is what everyone thought it was. After the deal, you have to keep managing the net working capital right to keep everything running smooth. Visit this thoughtfully chosen external source to expand your understanding of the topic. In it, you’ll find valuable information and additional details to enrich your reading experience. due diligence in an M&A deal https://kimberlyadvisors.com/articles/due-diligence-net-working-capital, make sure not to skip it!
In the end, net working capital is a big deal in M&A transactions. If both the buyer and the seller know what they’re doing and manage the net working capital the right way, they can make sure the deal is good and the business keeps growing.
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