Calculator
Working-capital peg estimator
Buyers and sellers usually agree the peg should be the trailing-twelve-month average net working capital. They almost never agree on the seasonal-swing adjustment. This computes a defensible figure with a methodology footnote you can hand the seller's advisor.
TTM avg NWC
$0
AR + Inventory − AP, twelve-month average
Seasonal trough NWC
$0
TTM avg adjusted by seasonal swing low
Defensible peg
$0
Trough + cushion + transition reserve
Methodology footnote
Set inputs to see the methodology footnote.
How this is computed
Net working capital here is the simple operating definition:
AR + Inventory − AP. We exclude cash (handled
in a separate cash sweep) and short-term debt (typically excluded
from peg by convention).
The defensible peg is built up from the seasonal trough rather than the TTM average. The reasoning: if you set the peg at TTM average, the seller can engineer a closing date in the seasonal peak and the buyer ends up with a working capital deficit at close. Setting the peg at trough plus cushion neutralizes that.
Owner-transition reserve covers known one-time outflows in the first 12 months: systems migration, owner-replacement payroll before the manager is fully ramped, deferred maintenance, the customer-comms campaign that comes with a brand transition. Don't double-count things that already live elsewhere in the deal model.
This is a starting point for negotiation, not a quote. Specific deals have idiosyncratic working-capital dynamics (subscription vs project businesses, deferred revenue, customer deposits, vendor terms). Adjust accordingly.