Whether you are involved as the purchaser or seller in an M&A transaction, you should be aware of events that may trigger adjustments to the purchase price.
WORKING CAPITAL ADJUSTMENTS -
In a stock transaction, the buyer will assume liabilities, which can be included in the working capital adjustment or provided for elsewhere in the purchase agreement. In an asset transaction, the buyer will not assume liabilities, so they are excluded from calculations.
No deduction is made for short- or long-term debt in calculating working capital. To protect the buyer against short- or long-term debt, a separate adjustment is made in the section of the purchase agreement stating that the business must be provided to the buyer debt free; any debt on the balance sheet will be deducted from the purchase price.
Please see full article below for more information.
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Topics: Balance Sheets, Contract Negotiations, Debt, Liability, Negotiations, Purchase Agreement, Stock Sale Agreements, Successor Liability
Published In: General Business Updates, Finance & Banking Updates, Mergers & Acquisitions Updates, Securities Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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