Net Working Capital in M&A:... | Lippes Mathias LLP

Net Working Capital in M&A: What Private Equity and Independent Sponsor Buyers Need to Know

November 23, 2025 | Corporate Blog

Net Working Capital (NWC) negotiation insights for private equity / independent sponsor buyers:

Often favor buyers due to “first-mover advantage” (ie, buyer prepares the post-close statement, which a seller then defensively reacts to)
More sophisticated sellers are leading to seller-favorable NWC adjustments, increasing from 26% (over a decade ago) to 48% now
Buyers need to sufficiently detail out GAAP deviations (ie, if the target is not properly accruing bonuses throughout the year)
Sellers need to thoughtfully articulate why certain NWC components may deviate from the norm (seasonality, nature of the business, etc.).
Always make sure your accountants are working closely with counsel on the purchase agreement sections related to NWC adjustments (i.e., consider attaching a NWC methodology exhibit and/or sharing examples of the calculation pre-close).

John Koeppel's commentary on "How Sellers are Narrowing the Gap with Buyers in M&A Post-Close Working Capital Adjustments," Lincoln International, October, 2025

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