Understanding Net Working Capital and its Importance in a Transaction
Brian Basil
Net Working Capital (NWC) is one of the most important negotiations in a transaction, often having the greatest economic effect compared to other terms in a deal. NWC is also
one of the levers buyers can use to potentially lower the price they pay for an acquisition. Why then, does NWC so rarely get discussed until the transaction is almost complete? The answer to that question, and the topic of NWC in general, can be complicated. However, a
good advisor should be able to simplify the explanation and act as an advocate to ensure the seller receives fair treatment. In this article, we will take a look at what NWC is, how it
is used, and the benefits an investment banker can provide to sellers by negotiating its value.
