Working Capital Adjustment in a Business Sale
The working-capital true-up quietly moves real money after closing — and the peg is where it is won or lost.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
Most business sales adjust the price after closing so the buyer gets a normal level of working capital with the business. The deal sets a target ("peg"), measures actual working capital at closing, and trues up the price for the difference.
Two things drive the outcome: how the peg is set and how working capital is defined and measured. Both are negotiated, and both can swing the final price.
Topics to check
Many deals are done on a "cash-free, debt-free" basis: the seller keeps cash and pays off debt at closing, and the price is adjusted to deliver a target level of working capital. If the peg is set too low, the buyer effectively overpays; if too high, the seller does.
Confirm how the peg was derived (e.g., a trailing-twelve-month average) and that it matches the accounting methodology used to measure actual working capital.
Working capital must be defined precisely — which current assets and liabilities are included, and which accounting policies apply. Inconsistent definitions (peg measured one way, closing measured another) are a common source of disputes and value leakage.
A schedule of sample calculations and a "consistent with past practice, then GAAP" hierarchy reduce ambiguity.
There is usually an estimate at closing and a final true-up weeks later. Watch who prepares the closing statement, the time the other side has to object, and how disputes are resolved — ideally by an independent accounting firm acting as an expert, not an arbitrator, with a defined scope.
A clause that makes one party’s accountant the final word on disputes is a red flag for the other side.
Key takeaways
- The peg (target working capital) is where the true-up is won or lost.
- Make sure the peg and the closing measurement use the same methodology.
- Define exactly which current assets/liabilities and accounting policies apply.
- Use a neutral accounting expert with a defined scope to resolve disputes.
- Beware a clause making one side’s accountant the final word.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Working-capital mechanics and dispute clauses are highly negotiated and deal-specific.
- Have accounting and legal advisors confirm the peg, definition, and dispute process.
Frequently asked questions
What is a working-capital adjustment?
A post-closing price adjustment that compares the actual working capital delivered with the business against an agreed target (the "peg") and trues up the price for the difference, so the buyer gets a normal level of working capital to run the business.
What does cash-free, debt-free mean?
A deal where the seller keeps the business’s cash and pays off its debt at closing, and the price is set to deliver an agreed level of working capital. It separates the operating business from its cash and debt.
Who resolves working-capital disputes?
Ideally a neutral, independent accounting firm acting as an expert with a defined scope. Be cautious of provisions that let one party’s own accountant make the final, binding determination.