Most purchase agreements adjust the price after closing to reflect the actual level of working capital, cash and debt delivered.

The mechanism. An estimated statement at closing, a definitive statement prepared after, a review period, an objection notice, negotiation, then referral of unresolved items to an independent accounting firm.

The target. Usually a normalized average of historical working capital. Defining the peg badly is the most common source of dispute, particularly for seasonal businesses.

Accounting principles. The agreement should state a clear hierarchy — specific defined methodologies first, then the company’s historical practice, then the applicable accounting framework. Without the hierarchy, buyers argue for the framework and sellers for historical practice, and both are arguable.

Illustrative schedule. An example calculation attached as an exhibit, prepared from a recent month, resolves more disputes than any amount of definitional drafting.

The expert’s mandate. The referee acts as an expert and not an arbitrator, decides only the disputed items, and must select a value within the range of the parties’ positions. Saying so expressly prevents the referee from conducting a broader inquiry.

Overlap with representations. A buyer may not use the adjustment to recover for the same matter as an indemnity claim; anti-double-counting language is standard and should be checked.