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Use this to set a fair working capital peg before closing. Keep it simple, document assumptions, and share a one‑page summary with the seller and advisors.

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Peg in 60 seconds

• The peg is the agreed “normal” net working capital (NWC) you expect on the day you take over.
• Think “full tank” at handover. If the tank is low at close (actual NWC < peg), the price adjusts so you aren’t paying for fuel you didn’t get.
• Simple NWC formula: AR + Inventory + Prepaids (+ other operating current assets) − AP − Accruals − Deferred revenue.

Tiny example

• Normal (peg) NWC = 600
• Actual at close = 520 → Difference = −80
• Result: price adjusts down by 80 (or you receive 80 later in the true‑up).

Why this matters

The peg stops last‑minute arguments about cash needs at closing. A clear, fair peg protects both sides and avoids surprises in the true‑up.

Quick doc pack (request first)

1. Monthly balance sheets (last 12–24 months)
2. Monthly P&L (same period)
3. AR and AP agings (most recent month)
4. Inventory report with slow/obsolete flag (if relevant)

What is the peg (plain English)

• The working capital peg is the agreed “normal” level of net working capital (NWC) you expect on the closing date.