Stock Purchase Agreement: Working Capital Purchase Price Adjustment Provision

by Practical Law Corporate & Securities

These Standard Clauses provide a working capital purchase price adjustment provision for a stock purchase agreement (SPA) involving a private US corporation. These clauses outline a two-step adjustment process, featuring an estimated adjustment at closing and a final, post-closing true-up mechanism. The provisions include definitions for critical terms such as Closing Working Capital, Current Assets, and Current Liabilities, and specify the application of US generally accepted accounting principles (GAAP) to ensure consistency with historical financial statements. The clauses also establish a detailed framework for dispute resolution, designating an independent accountant to act as an expert, not an arbitrator, to resolve disagreements over calculations. This resource offers insights on common negotiation points and market practice, drawing on data from the ABA Business Law Section M&A Committee's Private Target Mergers & Acquisitions Deal Point Study to inform drafting and negotiation strategies for M&A transactions.