DealLawyers.com Blog

This Thompson Hine memo offers suggestions for making working capital adjustment provisions in purchase agreements less ambiguous & reducing the potential for post-closing disputes.  Here’s the intro:

While most purchase agreement provisions will not be read after the closing of an M&A transaction, there is one provision that is sure to be revisited: the working capital adjustment. The purpose of a working capital adjustment is to ensure that the target company has an agreed upon level of working capital at closing and to discourage the sellers from manipulating working capital prior to closing.

The memo provides advice on definitional provisions, effective use of pre-closing estimates, dispute resolution & working capital escrows.

– John Jenkins