The working capital peg is the pre-agreed “normal” level of net working capital the seller is required to deliver at completion in an Australian business sale. The peg is typically calculated as an average of historical net working capital over a defined reference period (commonly trailing twelve months), with adjustments for seasonality, one-off items, and items the buyer will not actually collect.
The methodology used to construct the peg is a price negotiation, not an accounting exercise. Common contested points include the reference period, treatment of seasonality, treatment of slow-moving inventory, and the definition of debtor balances.