Glossary
Completion adjustment
The price adjustment at settlement that trues up the working capital actually handed over against the level the deal assumed.
In plain English
Business sale contracts are typically priced assuming the business comes with a normal level of working capital. The completion adjustment measures what is actually there on settlement day, stock counted, debtors listed, creditors confirmed, and adjusts the price for the difference.
Without one, a vendor can quietly run stock down and collect the debtors hard in the final months, handing over a business that is technically the one you bought, minus the working capital you assumed came with it. The adjustment clause is what makes that a price reduction instead of your problem.
Why a lender cares
Lenders care because a buyer stripped of expected working capital starts borrowed life with an unplanned funding hole. Due diligence sets the normal level from the actual trading history, which is what makes the adjustment enforceable rather than arguable. It is a standard recommendation in our Level 2 engagements.
Where this term takes you
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