On this installment of Sell Side Shorts, we’re breaking down the essentials of working capital in a transaction. Using a simple car dealership analogy, we explore why buyers expect a business to come with “enough fuel in the tank” to keep running after the deal closes.

You’ll learn:

• The basic formula behind working capital (current assets minus current liabilities.

• Why buyers look at 12-month averages to set a fair target.

• Common adjustments, like excess cash or deficits, impact negotiations.

• How escrow and purchase agreements address gaps between buyer and seller expectations.

Whether you’re preparing to sell or just want to understand how working capital impacts deal value, this episode gives you a straightforward overview of a complex but critical topic.