Hi, I am currently working on a deal wherein the Target is a restaurant chain and given that sales of the Target are all cash sales, the Target constantly has a negative working capital balance (when excluding cash) and this is mostly due to large Trade Payables. Do you have any thoughts as to how I should treat this? My thinking is to either reduce the purchase price by the value of the negative net working capital balance, or request that the seller ensure that there is enough cash left within the Target, to ensure that the cash balance is equal to the negative working capital balance. Any help will be appreciated.
Hi, I am currently working on a deal wherein the Target is a restaurant chain and given that sales of the Target are all cash sales, the Target constantly has a negative working capital balance (when excluding cash) and this is mostly due to large Trade Payables. Do you have any thoughts as to how I should treat this? My thinking is to either reduce the purchase price by the value of the negative net working capital balance, or request that the seller ensure that there is enough cash left within the Target, to ensure that the cash balance is equal to the negative working capital balance. Any help will be appreciated.