Working Capital Purchase Price Adjustment Clause
(Short Form)


Summary

This short form working capital purchase price adjustment clause provides for a one-step adjustment of the purchase price based on deviation from an estimated working capital amount. This clause contains practical guidance and drafting notes. Click here to see recent examples of purchase price adjustments in Market Standards. A working capital purchase price adjustment is used to ensure that the acquired business has sufficient cash post-closing to allow the buyer to continue operating the business in the ordinary course without the need to invest any amount in excess of the agreed-upon purchase price—which may result in the buyer overpaying for the business. A working capital purchase price adjustment clause also can be used to protect the seller if the working capital increases between the time of determining the initial valuation and the closing date, which would effectively result in the buyer getting a windfall. This type of purchase price adjustment can be especially important in...