The working capital adjustment is a post-completion price adjustment in an Australian share sale agreement that compares the actual working capital delivered at close against a pre-agreed “normal” level (the peg). Where actual working capital is below the peg, the seller refunds the shortfall to the buyer; where it exceeds the peg, the buyer pays the surplus.
The mechanism is intended to ensure the buyer receives a business that can fund day-to-day operations without immediate cash injection. In Australian sub-$20M deals, the methodology used to calculate the peg is often more consequential than the headline price.