NWC Peg / NWC Target
The normalised level of net working capital expected to be in the business at closing, used as the reference point for any completion accounts adjustment.
Also known as: Working capital peg, NWC target, WC peg
One-line definition
The NWC peg is the benchmark NWC level agreed between buyer and seller; if actual NWC at closing is above the peg the buyer pays more, if below the buyer pays less.
How the peg is set
Typically calculated as the average monthly NWC over the last 12–24 months, excluding exceptional items. TS teams are engaged specifically to determine a fair peg.
Common disputes
- Whether seasonal peaks should be included in the average.
- Treatment of long-outstanding receivables.
- Inclusion or exclusion of VAT balances.
- Definition of "normal" level for a fast-growing business.
Related terms
Net Working Capital
The normalised level of working capital a target business needs to operate — a direct lever on the purchase price.
Completion Accounts
A post-closing price adjustment mechanism where the actual balance sheet at the completion date is compared against an agreed target to determine a price true-up.
Locked Box Mechanism
A deal structure where the price is fixed at signing based on a historical balance sheet date, with no post-closing price adjustment.