Digital Learning
Mastering NWC Mechanisms
Duration:~ 5-7.5 hours
CPE Credits:8.5
Experience Level: Emerging M&A Pros | Mid-Career M&A Pros | M&A Leaders
What I will learn?
- Understand NWC and its impact on deal economics from an intuitive, visceral standpoint.
- Determine how NWC impacts valuation and purchase price via its impact on free cash flow and as a purchase price adjustment mechanism.
- Learn to negotiate NWC terms from the perspectives of both buyer and seller to achieve optimal deal outcomes.
- Gain insights into the negotiation process, adjustments, & motivations of transaction parties.
- Comprehend the relationship between accounting, financial, and legal considerations in shaping NWC mechanisms.
- Discern how NWC and the NWC target is impacted by factors, such as the cash conversion cycle, negative NWC businesses, revenue growth & decline, seasonality, and more.
About The Course
Equip your deal team with the knowledge to effectively analyze, negotiate, and document net working capital mechanisms to preserve or gain incremental deal economics. Participants learn how the accounting, financial, and legal considerations relate to effectuate a beneficial outcome.
Course Curriculum
- Net Working Capital Defined
- NWC and the Cash Conversion Cycle
- Ways Businesses Finance NWC Needs
- How NWC Needs Vary Across Industries & Businesses
- NWC Optimization
- Fluctuations In NWC as Sources & Uses of Cash
- The Multiple Ways NWC Can Impact Purchase Price
- NWC’s Impact on Free Cash Flow (“FCF”)
- NWC as a Purchase Price Adjustment Mechanism
- How to Think About “Normal” Levels of NWC in a Business
- NWC and NWC Targets in Seasonal Businesses
- Analogy: How to Think About NWC as Gas in the Car
- How NWC Targets Get Negotiated in M&A Transactions
- Buyer vs. Seller Perspectives and Motivations
- Three Junctures When NWC Typically Gets Calculated During a Sale Process
- Impact of NWC Target on “Same Price” Offers
- How NWC Targets Are Usually Calculated
- Considerations for NWC Targets Expressed as a Discrete Value vs. as a Formula
- Select Best Practice Tips for Buyers and Sellers
- Managing NWC Tighter Post Close as a Valuation Creation Strategy
- Exercise: Adjustments to NWC
- Determining Adjustments to NWC: Review Common Categories Checklist
- Cash-free, Debt-Free Considerations
- Income Tax Asset & Liability Adjustments
- Sub-Account Detail & Trial Balance Level Analysis
- Management Fee Adjustments
- One-Time, Non-Recurring Items Adjustments
- Accounting Considerations as Possible NWC Adjustments
- Special Considerations: Seasonality
- Special Considerations: Negative NWC Businesses
- Special Considerations: Impact of Significant Revenue Growth or Decline on NWC
- Special Considerations: Project Based Businesses and NWC
- Comparing Adjusted vs. Unadjusted NWC—Building Intuition
- Guiding Question to Determine Inclusion or Exclusion of an Account from NWC Analysis
- NWC Negotiating Tricks & Other Practical Considerations
- One-Way vs. Two-Way Tests
- Collars and Caps
- Locked Box Mechanisms as an Alternative to NWC Mechanisms
M&A Professions
- Financial Due Diligence
- Investment Banking
- Leveraged Lending
- Private Equity
CPE Credits
Details
- Last Updated May 2025
- CPE Credit 8.5
- Field of Study Finance
- Instructional Delivery Method Group Live
- Knowledge Level Basic
- Prerequisites None
- Advanced Preparation None
Refund Policy
For more information regarding refunds, concerns, and program cancellation policies, please contact the Private Equity Primer Support Team via email at help@pe-primer.com.
Compliant Resolution
For any complaints or issues with course materials or delivery, please email the Private Equity Primer Support Team at help@pe-primer.com.
NASBA Sponsor Statement
Private Equity Primer is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org
Benefits Obtained :
- Mastering NWC negotiations
- Understand the reasons for adjustments
- CPE Credit
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Private Equity Primer is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: NASBAregistry.org.