A working capital adjustment is a change to the price paid in the sale of a business, made after completion, that reflects the difference between the net working capital the business actually had on the completion date and a target level agreed in the sale contract. If the working capital delivered is above the target, often called the peg, the buyer pays the excess to the seller; if it is below, the price is reduced. It is the most common form of purchase price adjustment in mergers and acquisitions.
The mechanism protects the buyer against a seller running down stock, collecting receivables early or delaying payments to suppliers before the sale. Final figures are drawn up in completion accounts and normally sit alongside a net debt adjustment. Disputes usually go to an independent accountant. The alternative is a locked-box mechanism, which fixes the price in advance.