Working capital peg

Definition

The working capital the business must be delivered with at closing.

Why It Matters

A missing or sloppy peg is how a buyer discovers on day one that they bought a company with no cash to run it, then funds the gap out of pocket. Set it to a real normal, usually a trailing average rather than the closing-day snapshot a seller would prefer, because the level you agree is what the price gets trued up against.

In numbers: If the business needs $250k of working capital to run and the closing balance sheet delivers $200k, a peg adjusts the price down $50k; without one, the buyer funds that gap the day after closing.