Net Working Capital Target

Definition

The agreed level of working capital that the target business should have at the completion of an M&A transaction, established during negotiations and used as a benchmark for purchase price adjustments under a completion accounts mechanism. The target is typically set at the average net working capital over a 12-month trailing period, normalised for seasonality and non-recurring items. Deviations from the target at completion result in pound-for-pound adjustments to the purchase price.