Does anyone think we will see a possible 8-10% gain in the sp with the offer from edmund truell. Possibly irrelevant & it will never be accepted but just wondered if we might see some gains on monday ?
Addicknt I agree this is a consideration and you raise a good point. I have been heavily involved in two reasonable sized corporate sales ( up to £45 million ) although I am far from an expert so happy to be corrected on my recollections of this point.
Certainly the issue you raise has in both instances been included in the Sale and Purchase Agreement (SPA) and been an important negotiating point. Both were "cash free debt free" transactions and in this instance the underlying price excludes cash and long term debt debt and therefore adjustments made for these figures.
In one sale transaction the value of working capital was simply an adjustment to the agreed price however in the other it took account of the previous year's working capital so became an adjustment to an adjustment where trade creditors was left with the business. The rationale was that the sellers could increase the cash they took out of the business by failing to pay creditors and therefore maximise their cash position at the expense of the buyer being left with higher than normal trade creditors. Certainly in my case it was nothing to do with ensuring there was cash to keep the business running unless you mean that by reducing the amount paid the buyers have spare cash to inject ?
I agree the principle could apply in this case however thinking this through , assuming the working capital situation of the business has improved over time since the SPA was agreed , the position would be better than the underlying previous year and therefore any adjustment would be to increase the amount paid for the business.
Not claiming to be a expert but personally I don't see this is as a large downside risk.
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