Working Capital Adjustments for B2B Services Independent Sponsors
Securities and M&A counsel for independent sponsors negotiating B2B services transactions, from LOI to close to the capital markets that open up afterward.
B2B Services deals in the lower middle market run a specific playbook. Working Capital Adjustments is where the structure either holds or starts to leak.
The typical B2B services platform sits at $8M to $90M EV with EBITDA in the $2M to $18M range. The thesis runs on recurring revenue service platform with bolt-on operators. Most B2B services deals look better in the CIM than in the data room. Skip the CIM, ask for the contracts.
How Working Capital Adjustments actually gets structured.
Set the peg based on a trailing 12-month average, normalized for seasonality.
Define each line item in the schedule, especially deferred revenue and accrued vacation.
Cap the dispute resolution timeline at 30 days post-close.
Build a true-up payment mechanism funded out of escrow.
In B2B services, layer in MSA assignability mapped customer-by-customer as part of the Working Capital Adjustments workstream.
Using an unadjusted average that ignores seasonality. You pay twice for the same cash.
"Working capital is where deals are won or re-traded after LOI. Read every line of the schedule."Jason Powell · Working Capital Adjustments
The deal is one thing. The capital that opens up after close is another.
Most independent sponsors solve the closing capital and then run into the post-close capital problem alone. The capital markets relationships that matter at month 18 are part of this practice.
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Working Capital Adjustments for B2B Services, on independent sponsor terms.
Independent sponsor counsel that already speaks fluent deal-by-deal economics, structures clean LPAs, and travels with capital markets relationships for what comes after close.