How to Track a Working Capital Adjustment After Close

How to track a working capital adjustment is a purchase-price true-up ledger after the purchase agreement closes, not the indemnity escrow and not an earnout metric. For each deal, log the working-capital peg (target) copied from the agreement, the estimated closing net working capital, the preliminary price adjustment, the final closing statement date and amount, whether cash moved to or from the seller, and whether any working-capital escrow was drawn. Raziel's earnout tracking page is contingent price on a performance metric. Raziel's escrow holdback tracking page is remaining holdback versus claims. This page is the peg versus actual net working capital true-up.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the signed purchase agreement and the closing statements. Do not invent a peg.

What this working-capital ledger is (and is not)

In many private M&A deals priced cash-free and debt-free, the parties agree that the business should be delivered with a normalized level of net working capital. The agreed target is often called the working-capital peg. If actual net working capital at closing is above the peg, the seller commonly receives a dollar-for-dollar increase in price. If it is below the peg, the seller commonly receives a dollar-for-dollar decrease. Austin Legal Group describes the usual sequence as set the peg, estimate at closing, then true up after closing when the buyer prepares a final closing statement (commonly within about 60 to 120 days). Schneider Downs describes a similar estimate-then-true-up pattern, often about 60 to 90 days after close. Those articles are commentary. Your purchase agreement and exhibits control the definition of net working capital, the peg dollars, and the dispute process.

Seven columns on one working-capital-adjustment row

Open one row per purchase agreement (plus child rows for estimate and final statement). Attach the peg exhibit and both statements.

• Peg (target) copied. Dollar target and the NWC definition exhibit. Trailing averages are a common drafting starting point. Copy the signed number. Store silent if the deal used a locked-box or no NWC adjustment.

• Estimated closing NWC. Seller (or joint) estimate used to set the preliminary purchase price at closing. Copy the printed figure and the estimate date.

• Preliminary adjustment. Estimated NWC minus peg (or the formula your agreement prints). Record the dollar move and the direction (buyer pays seller, or seller pays buyer).

• Final closing statement. Date the buyer delivered the final NWC calculation, and the final NWC dollars. Copy objections and resolution dates if a dispute notice issued.

• Final true-up cash. Dollars that actually moved after the final statement. Keep this separate from indemnity escrow draws and earnout payments.

• Working-capital escrow (if any). Amount funded at closing to secure a possible downward true-up, release conditions, and whether it was drawn. Montague Law notes that middle-market deals often fund a separate working-capital escrow even when representation and warranty insurance shrinks the indemnity escrow. That is market commentary, not your deal. Copy your escrow schedule.

• Still open (yes / no). Open until the final true-up cash posts and any WCA escrow releases. Then close the row. Do not leave the price adjustment mixed into the indemnity holdback balance.

Copy the signed definition, not a blog average

Do not paste a "typical" peg percentage or a universal 90-day clock. Thompson Coburn notes that imprecise NWC definitions and mis-set pegs are a common source of post-closing disputes. Auxo Capital Advisors describes an adjustment escrow as consideration held to secure a downward true-up, separate from indemnification recovery unless the agreement says otherwise. Those are drafting notes. Your exhibit listing included and excluded current assets and liabilities is the only definition that belongs in the ledger.

Keep the true-up off the indemnity tab

A downward working-capital true-up is purchase-price mechanics. An indemnity claim is a breach claim. Unless the purchase agreement expressly routes one through the other, keep separate cash rows, separate escrow schedules, and separate close dates. That split is what keeps MOIC and DPI from double-counting the same dollars.

When the ledger holds

The row holds if the seven cells are copied from the PDFs (or marked missing). It fails when you invent a peg, book an earnout as the true-up, or fold a working-capital shortfall into general indemnity without the agreement saying so. Raziel's MOIC calculator is only honest if that price true-up has a date and a label. Raziel does not interpret your purchase agreement. Copy the seven columns.