The working capital adjustment true-ups the price after completion, based on whether the business actually had enough day-to-day cash and stock on hand compared with what was agreed going in.
Technically, it is a post-completion price adjustment comparing actual working capital delivered at completion against a pre-agreed target, the peg, with the seller refunding any shortfall and the buyer paying any surplus.
The buyer wants the mechanism because it protects them from receiving a business that has been stripped of cash and stock just before handover. The seller’s real interest is not avoiding the mechanism itself but making sure the peg it is measured against reflects how the business actually runs.
In practice, the peg does more work than the headline price. A peg set too high effectively claws back part of the purchase price before you have even banked it, dressed up as an accounting adjustment rather than a negotiation.
What you as a seller should push back on: a peg calculated over a reference period that does not reflect normal seasonal trading, and adjustment methodology that lets the buyer introduce new accounting treatments after completion that were not agreed upfront.