M&A Post-Closing Purchase Price Adjustments: Planning and Drafting Strategies

Defining Working Capital, Setting Baseline Amount, Specifying Accounting Principles, Navigating Overlap With Indemnification Clauses

Recording of a 90-minute CLE webinar with Q&A

Conducted on Thursday, May 25, 2017
Recorded event now available

This CLE webinar will provide guidance to counsel drafting and negotiating purchase price adjustments (PPAs) provisions in M&A acquisition agreements.


PPAs provisions are a commonly-used mechanism in M&A transactions to enable the buyer to ensure that it receives the target company upon closing with sufficient net working capital (NWC) to be able to support its operations, so that the buyer doesn't need to make an infusion of cash into the target company soon after closing.

In addition to NWC-based adjustments, PPAs sometimes also adjust purchase price based on the target company's net assets, inventory, cash balance, accounts receivable collections and other financial measures.

PPAs can also be a way for the buyer to claw-back some of the purchase price that it paid for a target company with improperly calculated financial measures, so that the purchase price that it pays corresponds to the target company's actual value.

However, for sellers of companies in M&A transactions, PPAs can severely adversely impact their net sale proceeds and therefore need to be carefully crafted by their counsel to protect their rights.

Accordingly, counsel drafting PPA provisions in M&A acquisition agreements must focus on several key issues, including defining the elements that will comprise NWC or the other financial measure on which the PPA will occur, setting the target amount, specifying the accounting principles to be used in performing the PPA calculation, attaching example calculations to the acquisition agreement, burden of proof, mechanism for resolution of PPA-related disputes, payment of amounts due upon completion of the PPA process, and understanding the overlap between PPAs and general indemnification and tax indemnification provisions.

Listen as our authoritative panel of M&A attorneys discusses considerations and best practices for deal counsel when planning for and drafting PPAs in the acquisition agreement.


  1. Purchase price adjustment provisions—brief overview
  2. Planning and drafting strategies
    1. Defining working capital
    2. Setting the baseline amount
    3. Accounting methods/principles
    4. Overlap with indemnification provisions


The panel will review these and other key issues:

  • What issues should counsel take into consideration when drafting and negotiating PPA provisions in acquisition agreements?
  • What are the most commonly disputed issues with PPAs?
  • How can PPAs overlap with the general indemnification and tax indemnification provisions of the acquisition agreement?


John J. McDonald, Partner
Troutman Sanders, New York

Mr. McDonald counsels clients on a full range of corporate transactional matters, focusing on private equity and strategic mergers and acquisitions (M&A) transactions, venture capital and other financing transactions, and private equity fund formation. His private equity M&A practice entails representing private equity sponsors in leveraged acquisitions of portfolio companies, “bolt on” acquisitions and recapitalizations of portfolio companies, and subsequent divestitures of portfolio companies. He also has significant experience representing sellers in M&A transactions involving private equity buyers. His strategic M&A practice involves representing publicly-traded and privately-held buyers and sellers in M&A transactions across a broad range of industries, both domestic and cross-border.

Michael Weinsier, Partner
Troutman Sanders, New York

Mr. Weinsier focuses his practice on representing private equity and other investment funds, family offices and other financial sponsors, and a wide variety of public and private operating companies, including the portfolio companies of financial sponsors and other strategic buyers and sellers, in all aspects of their investment, financing and other transactions. These transactions include primary and secondary leveraged buyouts and other domestic and cross-border mergers, acquisitions and divestitures of public and private companies, auction bids, acquisitions of non-control equity interests, economic participations and other co-investments, joint ventures, securities offerings, and acquisition financings, including sponsor bridge facilities and other sponsor financings.


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