I am currently working on a buy-side transaction and am trying to provide guidance to the other side on "standard" levels of working capital left in the business when closing. As the seller does not have an investment bank involved I want to provide them with guidance from some third party research to cite so our guidance does not sound like self-dealing. Is anyone aware of any database/reports/metrics etc that show what normal working capital levels look like?
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Don't know about any online resources, but creating rolling averages on x number of months is what I've always done (w/ adjustments as needed).
Something strange here. Someone at the target (the VP of Finance, CFO, or someone similar) should know exactly what the company's working capital looks like from month-to-month. Why do you need to tell them something so fundamental about their business? There really is no "standard" level of working capital, or at least not that you're going to be able to find.
Seller should provide you with average monthly WC stats for the past year, and you should advise your client to negotiate a closing adjustment if, at close, the balances are abnormally high or low relative to the average. Unless the target has been gaming their WC in anticipation of a sale (highly unlikely), the historical averages are going to be the best proxy for what your client is going to inherit.
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