Working Capital Adjustment” usually refers to a certain type of Purchase Price Adjustment in an Acquisition transaction, which can be positive or negative, and is determined based upon a Seller’s actual Working Capital as of the Closing and how it compares to a previously agreed upon Working Capital “peg” or target.

The Seller’s Working Capital often is a core component of a typical Purchase Price Adjustment in an M&A deal. Establishing an appropriate Working Capital target is usually negotiated at the Term Sheet stage, and we recommend that the Seller take this approach whenever possible in order to surface this important deal issue sooner rather than later.