Target working capital calculator
Closing price is adjusted when actual working capital at closing does not match the target; this calculator shows how much consideration goes up or down based on working capital shortfall or surplus.
The target is negotiated based on a normalized average (e.g. 12 months).
Agreement parameters
| Concept | Amount (MXN) |
|---|---|
| Working capital adjustment | -MX$1,100,000.00 |
| Original cash consideration | MX$3,300,000.00 |
| Cash consideration after adjustment | MX$2,200,000.00 |
A working capital shortfall at closing reduces peso for peso the cash the seller receives; a surplus increases it by the same amount.
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How to interpret the results
The number that matters for the seller is cash consideration after the adjustment: the amount received at closing. A negative adjustment (working capital shortfall) reduces that amount; a positive one (surplus) increases it. Use this result together with the target agreed in the LOI to validate closing or to negotiate the target in advance.
What other tools and guides to review?
Understanding the working capital adjustment before signing the LOI avoids surprises at closing. For the full concept and how to negotiate the target, see Working capital in the glossary and the guide to selling a business in Mexico.
Sources
Sources on working capital adjustments in M&A and negotiating the target: