Quick take
The peg is the negotiated answer to what normal working capital should look like at close.
Glossary term
Working Capital Peg
A working capital peg is the benchmark amount of net working capital a buyer expects the seller to deliver at closing. It is set during diligence and becomes the reference point for the purchase agreement's working capital adjustment mechanism.
Why it matters
If the peg is set too high or too low, value can shift between buyer and seller through the closing adjustment even when the headline purchase price looks unchanged.
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Sorai Editorial
Reviewed by Sorai’s diligence research and workflow design team.
Financial, tax, legal, and transaction process terminology for investor-facing diligence workflows.
Key points
- Is derived from historical working capital analysis and normalization.
- Usually reflects seasonality, carve-outs, and account-level judgments.
- Becomes part of the purchase agreement economics.
- Can trigger post-close disputes if it is weakly supported.
- Should be reviewed alongside QoE, cash flow, and net debt mechanics.
Related terms
Related resources
Frequently asked questions
What is a working capital peg?
It is the benchmark amount of net working capital the buyer expects to receive at closing.
Who sets the working capital peg?
The peg is negotiated by the buyer and seller using diligence analysis and purchase agreement discussions.
Why do working capital peg disputes happen?
They happen when the historical analysis, account perimeter, or normalization logic was not clearly documented during diligence.