Net Working Capital (NWC)
Definition
Net working capital is a company’s current assets minus its current liabilities, the short-term capital tied up in running the business day to day. In M&A, the buyer and seller agree a "normal" level of NWC, and the purchase price adjusts up or down depending on what is actually delivered at closing.
In practice
NWC adjustments are where sophisticated buyers quietly win or lose millions after the headline price is agreed. Sellers drain working capital before closing; buyers set the peg high. It is unglamorous, and it is negotiated in almost every private deal.