Practical business guides

How Working Capital Changes Acquisition Financing

Amati Capital Partners · October 23, 2026

An acquisition can be funded at closing and still leave the business short of cash. Model the purchase price, agreed working-capital delivery, operating cash cycle and available credit together so that the company can continue trading after completion.

Separate the purchase from the operating requirement

The money paid to the seller and the liquidity required by the business serve different purposes. Employees, suppliers and taxes still need to be paid while customer cash is being collected. Determine what cash, debt and working capital the agreement assumes will transfer, and have advisers confirm the definitions.

Understand the working-capital mechanism

Purchase agreements may compare delivered working capital with an agreed target, using transaction-specific definitions and adjustments. Review the proposed target against seasonality, recent growth, aged balances and unusual items. A historical average can be misleading if the business has changed. Legal and accounting advisers should confirm how the mechanism operates.

Build a combined sources-and-uses model

Illustration only: a buyer plans a CAD 5 million payment to a seller, CAD 200,000 of transaction costs, CAD 500,000 of additional operating liquidity and CAD 300,000 of contingency. The plan requires CAD 6 million before considering any other uses, not simply the CAD 5 million headline payment. Check whether liquidity is already included in the transaction assumptions to avoid counting it twice.

Test the first months after completion

Model collections, supplier payments, inventory replenishment, payroll, debt service and integration costs. Stress the timing as well as the amount of cash flows. Check the availability conditions on any revolving facility: its stated limit may differ from the amount accessible against eligible assets or other requirements.

Resolve responsibilities before signing

Identify who prepares the completion accounts, when disputes are resolved and how interim funding will be available. Make sure the lender model and purchase agreement describe the same transaction. Amati can help connect acquisition economics, financing assumptions and operating requirements while legal and accounting advisers confirm the contractual treatment.