Working capital adjustments are often some of the most highly negotiated provisions in a private company M&A transaction agreement. The provisions are complex and involve a blend of legal and accounting concepts and standards and can have an immediate impact. It is essential that deal team members understand not only the nuts and bolts of working capital adjustments but also the nuances thereof to avoid traps for the unwary. M&A lawyers must be fluent with the constituent elements of working capital in a particular business in order to properly understand their client’s business objectives and to properly document the business agreement.
In July 2017, this article was cited in a Delaware Supreme Court filing. See page 33 of the filing here.