The level of working capital transferred on the closing of a transaction can be one of the most contentious issues between buyer and seller because of its impact on the value of the business. However, determination of the appropriate level can be neglected in going concern valuations and, in the transaction context, it is often deferred until late-stage negotiations with arbitrary or poorly understood results. This presentation, similar to the accompanying paper, examines how working capital should be settled in the transaction context. This includes consideration of appropriate working capital metrics; the link between business valuation methodology and working capital assumptions; the implications of diverging interests between buyer and seller prior to closing; the methodology for determining and structuring the working capital to be conveyed on closing; and incorporating this into the transaction documentation. These are matters of concern to valuators, M&A advisors and lawyers.
Presenter: Blair Roblin LLB, MBA, MA, PHD ~ Dr. Roblin is a former board director of the Institute and has practiced in the business valuations field for 30 years. He is the author of Putting the Pin in Net Working Capital: Important Value Implications for M&A Transactions, which was the Institute’s Ian R. Campbell Research Initiative winner in 2013.
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