POST #1: PURCHASE PRICE ADJUSTMENTS - FINANCIAL TARGETS

Author: Deepak Kumar

Adjustments to a purchase price due to post-closing audits of accounts receivable, payables, or working capital can frustrate both parties in an M&A deal. Such adjustments are often a result of incomplete due diligence and are rarely a win-win situation.

To avoid these pitfalls, we advocate for a full audit alongside a financial model that accommodates various scenarios. Clear targets for working capital, receivables, and financial metrics should be established in the purchase agreement to minimize ambiguity and ensure transparency, avoiding any surprises post-closing.