With the growth and influence of private equity during the last 20-plus years, post-closing purchase price adjustments in mergers and acquisitions have become the norm.

Today, more than three-fourths of middle market transactions include price adjustment mechanisms based on the actual amount of working capital delivered by the seller at closing relative to an agreed-upon target amount. This adjustment mechanism is used for a very simple reason: Businesses require a certain amount of working capital to meet ongoing cash flow needs.

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