Introduction

In a company sale, most ofthe negotiation energy goes into the EBITDA multiple, net debt, and earn outmechanics. One parameter gets far less airtime and still moves the final pricesignificantly: working capital. Mishandled, it becomes a source of friction atclosing. Mastered early, it contributes to a balanced deal.

According to the VlerickM&A Monitor 2025, valuation by multiples (revenue, EBITDA) remains thedominant approach in Belgian transactions, used in 72% of deals. In that setup,working capital is a key adjustment variable. It directly influences what thebuyer actually pays the seller on closing day.

What working capital actually is

Working capital representsthe financial resources required to fund the operating cycle. Most SME ownersalready track it closely, often without formalising it in transactional terms.

In practice, it is the gapbetween operational current assets (trade receivables, inventory) andoperational current liabilities (trade payables).

For Belgian SMEs, workingcapital often acts as an implicit source of financing, particularly throughsupplier payment terms. That quiet role is exactly what makes it a sensitivetopic once a transaction is on the table.

Why working capital must be normalised before a sale

In an M&A context,working capital at any given date does not necessarily reflect the business insteady state. It must be normalised, in the same way EBITDA is normalised.

Ahead of a sale, it is notuncommon to see practices that temporarily flatter the cash position.Accelerating customer collections. Delaying supplier payments. Runninginventory down. These moves improve working capital in the short term, but theytransfer a future financing need to the buyer, and a serious buyer will spot itin due diligence.

Normalisation adjustmentstypically cover seasonality, one time projects, obsolete inventory, agedreceivables, and accruals that are not recurring. The goal is a normativeworking capital figure that reflects the company's structural need, not asnapshot engineered for the deal.

The role of working capital in the EV to Equity Value bridge

This is where workingcapital takes on its full transactional weight. When a price is derived from anEBITDA multiple, the Enterprise Value implicitly assumes a normalised level ofworking capital required to run the business.

Between the valuationreference date and the closing date, working capital moves. That variation(ΔWC) is captured in the bridge from EV to Equity Value, following this logic:

Equity Value = EV −Net Debt − ΔWC

The mechanics areintuitive. An increase in working capital (positive ΔWC) means more cash istied up in the operating cycle. It is a use of cash that reduces the valueflowing to shareholders. A decrease in working capital (negative ΔWC) releasescash and adds to Equity Value.

A protection mechanism for the buyer

This adjustment is notjust an accounting exercise. It protects the buyer against real risks: weakreceivables monitoring, deterioration of the customer portfolio, longercollection timelines.

An apparent improvement inworking capital driven by a jump in receivables does not guarantee futurecollection. The bridge captures the variation precisely to prevent the buyerfrom paying for additional working capital whose realisation is still uncertain.

Anticipate to negotiate better

For both seller and buyer,mastering working capital upstream of the transaction is a strategic advantage.The earlier it is analysed, the easier it becomes to agree on a realisticnormative level, avoid surprises at closing, and reduce the risk of disputesafter the deal is signed.

Working capital is not aclosing week technicality. It is a material part of the price, and it deservesthe same preparation as EBITDA and net debt.

The Dups approach

At Dups, we treat workingcapital as a negotiation lever, not an adjustment to be discovered in the finaldays before closing. We work with shareholders to analyse and normalise theirworking capital position early in the process, so it enters price discussionsas a prepared input rather than a surprise in the bridge. If you areconsidering a transaction and want a clear view of where working capital couldmove the deal value, let us talk.

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