Working Capital Purchase Price Adjustment Clause
(Long Form)


Summary

This Working Capital Purchase Price Adjustment Clause (Long Form) provides for adjustment of the purchase price based on a pegged working capital amount. This clause includes practical guidance, drafting notes, and alternate clauses. 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 the ...