Success Story: Navigating a Net Working Capital and Earn-out Dispute

The Client

The seller, an HVAC company, engaged Weaver’s Transaction Advisory Services practice to give a second opinion on the buyer-prepared post-close net working capital adjustment and earn-out results.

The Challenge

Specifically, the seller tasked Weaver’s transaction advisory group with calculating and determining if the closing net working capital exceeded the net working capital target established in the purchase agreement. Weaver was also tasked with assessing whether earn-out targets set forth in the purchase agreement were met. The issue was strongly contested by both the buyer and seller.

The Process

Weaver’s Transaction Advisory Services team conducted a detailed net working capital analysis and post-close EBITDA calculation to determine and support the seller’s position. Weaver obtained granular level financial data to reconstruct and calculate net working capital and EBITDA consistent with the terms of the purchase agreement.

The Deliverables

Net working capital dispute: Weaver’s team worked directly with the buyer and the buyer’s accounting personnel which eventually resulted in a significant working capital adjustment in the client’s favor.

Earn-out dispute: Additionally, Weaver prepared a report for the earn-out dispute that was used by an independent accounting firm arbitrating the dispute. Based on Weaver’s work supporting the dispute, the independent accounting firm determined that EBITDA exceeded the earn-out threshold set forth in the purchase agreement. Because of this, the earn-out payment was awarded to our client.

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