Working Capital Peg
Written by Christopher Krassnig - Founder - Kairos Exchange and ZenoX Media.
Published
- Checks in every memo8
- Automatic on day one3 of 8
- Read by handad spend and processor payouts
- Tracked ecom salesEUR 200M+ZenoX ad-management figures, not Kairos deal volume - Kairos hasn't closed a deal yet.
Working Capital Peg is a price adjustment that ties an acquisition's payment to a target level of working capital, cash plus receivables and inventory minus payables, measured at closing. Hand over less than that target and the price drops by the shortfall; hand over more and the seller collects the surplus. It exists so a seller cannot drain the till before handover and still collect the agreed price.
The Two Ways It Gets Set
A peg can be a single fixed number both sides agree on before signing, negotiated off historical averages, or a formula measured after closing against a defined balance-sheet snapshot with a true-up payment settling the difference. The fixed-number version is simpler and avoids a post-closing dispute. The measured version protects against a one-time swing the historical average missed, at the cost of both sides needing to agree how the number gets calculated and checked. Either way, the mechanic only works when both sides can point to the same underlying data, an accounting ledger or a connected data feed, rather than trusting a number one side simply hands the other.