When you’re working through your working capital settlement provisions in a transaction, you want to keep an eye out for any increase in working capital that’s not really valid. 


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What to look for when obtaining financials for period from diligence through closing?

For example, if AR goes up 20% from your estimate in the purchase agreement and your settlement date or your transaction date, keep an eye out for any uncollectable amounts that have continued to age that are really due to improvement in the business or increased revenue, because these accounts receivable generally aren’t what you thought you were getting when you were initially negotiating the working capital target in the purchase agreement.