Net Working Capital – And How To Keep More Of It
Stock vs. Asset Sales – A Visual Explanation
April 2, 2017
Around the Web: A Month in Summary
August 12, 2017
Net Working Capital And How to Keep More of it in a Transaction.In theory all assets necessary to produce the revenue and earnings of your company needs to be passed to the buyer at close – and that includes an “operating level” of net working capital. It is, in my opinion, extremely important to know how this works before entering into a transaction. And if you realize how it works a year or two before a transaction, you can often tighten up your operations and walk away with significant more cash out of the deal.
This module starts with a basic explanation of Net Working Capital then it uses a real-world example of NWC from an actual deal. We follow the NWC concept from the NWC language in a real letter-of-intent, to the NWC calculation spreadsheets, how we negotiated the NWC target value, and into the actual NWC language that ended up in the final purchase agreement.
The module ends with a look at typical issues that arise and how to maximize the net proceeds from a business sale by working with the NWC concept.
Related posts
Selling the shares you hold in a company vs. selling the assets out from the under the company can make a big difference in taxes, who assumes certain liabilities and what happens to certain contracts. There are challenges with each, such as the assignment of customer agreements with an asset sale, and change of control clauses in stock sales. We’ve known Ney Grant, an M&A Advisor on the west coast, for many years and he has recently released what looks to be a quality eLearning program (a series of 25 videos and materials) on how to sell your middle market business. He has shared his video with us on Stock vs. Assets sales which describes, in very visual terms with a stack of cash and toy tractors, what really happens in a stock sale vs. an asset sale and why buyers typically prefer asset sales.