UAE · COMPLIANCE & ADVISORY · SINCE 2017
SERVING ALL 7 EMIRATES OF THE UAE
M&A · 14 Apr 2022 · 8 min read

Working capital pegs in UAE deals: closing-mechanic patterns we keep seeing.

Author · Jinu Govindan

Two parties can agree a headline price and still fight over millions at completion. The battleground is almost always the working-capital peg — the closing mechanic that adjusts price for the working capital actually delivered on the day.

The peg is a normalised target, not a snapshot

The target (or “peg”) should be a normalised level of working capital — typically an average across a representative period that strips out one-offs and reflects the seasonality of the business. Set it off a single month-end and you bake in whatever distortion happened to sit on the balance sheet that day.

Define the line items before you sign

Most disputes are definitional: what counts as debt versus working capital, how accruals and provisions are treated, the cut-off, and the true-up timetable. In a cash-free, debt-free deal these definitions decide who keeps the cash. Agree them — in writing, with worked examples — in the SPA, not in a post-completion argument.

General transaction guidance; closing mechanics should be drafted with deal counsel for the specific transaction.

This note is general guidance and does not constitute tax or legal advice. For an opinion on your facts, contact the firm directly.
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