In 2016 and 2017, over 80% of purchase price adjustments in M&A transactions involved working capital adjustments, according to “SRS Acquiom’s 2018 Deal Term Study.” The purchase and sale agreement (PSA) commonly includes a purchase price adjustment provision to address differences between the target working capital the buyer expected at the time the PSA is signed and the working capital the buyer received at closing. Disputes often arise between the buyer and the seller as to the proper determination of the working capital based on the closing balance sheet. An article by Jeff Litvak, senior managing director, and Jason Tolmaire, senior director, both with FTI Consulting, explains how working capital is calculated, how working capital is included in the purchase price, and how disputes arise in the calculation of working capital.