CPD courses for law and accounting: negotiating big financial issues in Sale and Purchase (S&P) transaction agreements

Accredited CPD course provider FTA Ltd considers key points when negotiating one of the big issues for transactions: working capital.

Big issues for legal and other professionals: working capital

When purchasing a business a buyer might do all they can to identify financial data which enhances their position. As part of due diligence, the buyer’s accountants might use financial figures to argue that the target business has higher than expected working capital requirements.

Lawyers and other advisers: what’s the impact?

What’s the impact on negotiations? Put simply, identifying higher than expected working capital requirements gives the purchaser all the ammunition they need to try and reduce their asking price.

The buyer may argue that the seller has mis-represented the working capital requirements for the business. The buyer might argue that it is raising all the debt it possibly can as part of the purchase. The buyer has to keep some debt facilities in reserve to fund the unexpectedly high forecast working capital requirements.

With the new information, it appears that not all of the debt raised can be paid out to the seller. The seller is presented with a last minute price reduction: a last minute price “chip”. If the seller has been dealing exclusively with one buyer, and other potential buyers have left the process, the seller may feel they have little option but to accept.

The “big issues” CPD course

On FTA’s “Big Issues” seminar, delegates identify businesses with potentially low and potentially high working capital requirements: the ones where the working capital requirement might become a big issue.

Participants talk about the impact on negotiations, and break into groups to come up with a few suggestions for each side. Buyers will want to argue for high working capital requirements. What sources of information might be useful to them? What kind of time period should they look back over? What about looking forward?

Sellers know that a buyer could argue for high working capital requirements. How could a seller prepare for the debate? Is “do nothing” ever an option? What information could the seller helpfully release in advance? What different opportunities are provided during the process? What kind of buyers might the seller want to gravitate towards?

Accredited CPD training course provider FTA's “negotiating big issues” CPD course is designed to appeal to professionals working in law or accountancy, as well as other commercial managers responsible for negotiating transactions. While popular with The Law, this CPD course is regularly attended by a mix of participants from accounting, corporate finance, general advisory and commercial disciplines.

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