It means that the target (seller) keeps cash on their balance sheet at close and has to repay any outstanding debt obligations.

Working capital uses a negotiated target or peg and the purchase price is adjusted dollar-for-dollar based on the overage or insufficiency of what is delivered vs. the target/peg.

Mechanically, how it works:

Enterprise Value/Purchase Price +Cash -Debt +/-Difference in Working Capital = Proceeds to Shareholders at Close

 
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