Transaction Case: Should we include working cash in net debt?
Simians,
It's the real case I am doing at work now. I am looking for best practice from experienced collegues.
Assumptions:
1. EBITDA 2m$
2. Negotiated price for equity is: 10xEBITDA - NET DEBT
3. No debt in company
4. Working cash we set 150k $ (it stays in the company)
5. 10xEBITDA is 20m$
Now, we (the seller) want the buyer to pay for the Working Cash as a part of Net Debt (so he will pay 20 150 000$)
The buyer says that working cash is within 20m$ as a part of working capital (so he will pay 20 000 000$ only)
I know buyers attitude is kind of correct, but we want that cash to be repaid :-) "That depends on your point of view." Usually the result depends on negotiations, but I would like to know what is your best practice
Best regards from Central Europe!
MP
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