An acquisition price can look settled while the amount of operating capital delivered with the business remains uncertain. Rajeev Khandelwal’s documented M&A background provides context for that issue. A company needs inventory, receivables and supplier credit to trade normally. The agreed working-capital target helps determine whether the buyer receives a functioning operating position or must supply additional cash shortly after completion.
Define normal for this company
A useful target reflects the company’s actual commercial cycle, including seasonality and recent growth. One balance-sheet date may be unrepresentative. The analysis should examine several periods and understand the drivers of change. A distributor approaching its busiest season may require more stock than at another point in the year, so a simple historical average can be insufficient without a clear explanation of the expected completion-date operating needs.
Agree the calculation
The parties need consistent treatment of items such as overdue receivables, obsolete stock and accrued operating costs. Classification choices can materially affect the result. A balance should not be counted as normal working capital merely because it appears in an accounting category. The commercial assessment asks whether the item genuinely supports ordinary trading and whether its stated value is likely to convert into cash or a valid reduction in future payments.
Watch pre-completion behaviour
A seller could improve cash temporarily by reducing stock or delaying suppliers, leaving the buyer with an operating shortfall. The transaction process should consider those incentives and the evidence available at completion. The objective is to preserve normal business conduct rather than encourage a short-term balance-sheet presentation. Clear expectations help both parties understand what operating condition is being transferred alongside the shares or assets included in the agreed purchase.
Price the handover completely
Credit Connect’s M&A offering connects this topic to Rajeev’s wider capital advisory landscape. Working-capital terms are part of acquisition economics, not a minor closing adjustment. A well-defined target makes the handover more transparent and reduces surprises in the first operating months. The buyer can then assess the actual capital needed to own and run the business, while the seller understands how its ongoing trading decisions affect final consideration.
