BUYING WHAT YOU THINK YOU’RE BUYING
As you know, the acquisition process can be a long one, taking months or even years, and in business, conditions can change quickly. Over this extended period, you want to ensure that the company you started negotiating with is the same one you will receive once the deal is closed. To that end, you need to include in the LOI a metric that provides an objective way to determine that the business is substantially the same at closing as it has been during the negotiations.
The metric I prefer to use here is net working capital. The relevant clause typically states that the net working capital is expected to be substantially the same at close as it was at the time the LOI was signed. This prevents the owners from ...
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