The M&A Adjustments That Quietly Reduce Your Sale Price

The number in your LOI is not the number you will receive at closing. Purchase price adjustments are built into nearly every M&A transaction — and founders who do not understand them often lose value they thought was already agreed.

Why Adjustments Exist

Your purchase price is based on the business at a point in time. Between signing and closing, the business keeps operating. Cash moves. Receivables change. Liabilities shift. Adjustments ensure the buyer receives what they paid for — and you get credit for what you actually delivered.

Working Capital: The Most Negotiated Mechanism

Working capital is current assets minus current liabilities. The parties agree on a target at signing. At closing, actual working capital is measured against it.

• Above target — price goes up
• Below target — price goes down

The definition of what counts is everything. Sellers who accept the buyer’s proposed definition without pushback routinely discover the cost at the closing table.

Escrow: The Money You Don’t See on Day One

At closing, 5% to 10% of the purchase price is held in escrow — available to the buyer if post-closing claims arise. It is released to you after 12 to 18 months, assuming no disputes.

The wire you receive on closing day is not your full deal value. Plan accordingly.

The True-Up: Where Disputes Are Born

Closing happens on estimated figures. Within 60 to 90 days, the buyer prepares a closing statement with actuals. If working capital came in below the estimate, you owe the difference — drawn from escrow.

The buyer prepares that statement. Without a negotiated dispute process, you have limited recourse.

What to Lock Down Before You Sign

Adjustment mechanics are set in the purchase agreement, not the LOI. By then, leverage has shifted. Before the LOI is signed, push to:

• Define working capital clearly and on your terms
• Set a realistic, defensible target
• Limit escrow size and duration
• Establish a dispute process for the true-up

Every open term is a term the buyer will define in their favor.

GNS Law advises founders through every stage of a business sale, including purchase price adjustment negotiations, escrow structuring, and post-closing true-up disputes. If you are preparing to sell or currently in a transaction, contact us at gnslawpllc.com to make sure the number you agree to is the number you walk away with.

About GNS Law

GNS Law is a business law firm for entrepreneurs and business owners who are building, scaling, or preparing to sell their companies. Founded by M&A attorney Gabriela N. Smith, the firm advises clients across the full lifecycle of their business — from entity formation and contract review to risk management and exit transactions. GNS Law works with founders and operators across industries, domestically and internationally, delivering practical legal guidance that moves with the pace of business.

This article is for informational purposes only and does not constitute legal advice. Consult a qualified M&A attorney for guidance specific to your situation.