M&A Deal Structures: Working Capital Adjustments vs. Locked Box Closing Approach

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Brett A. Cenkus has 20+ years of experience in business law, finance, and entrepreneurship. Through Cenkus Law, PC, he provides advice and services for mergers & acquisitions (M&A), securities offerings, founders’ agreements, and other general business law issues.

Through Braaten Woods, LLC, Brett helps business owners in the lower middle market ($2MM - $25MM) position themselves for sale, find buyers, negotiate, and close M&A deals.

Brett regularly consults with entrepreneurs and invests his own capital as an angel investor.

From 2010-2013, Brett served as Chief Legal Counsel of a publicly-traded international oilfield services company. From 2001 to 2006, he and a partner founded and built Paragon Residential Mortgage. Bridge Investments acquired Paragon in 2006.

Brett holds a Juris Doctorate from Harvard Law School and a Bachelor of Arts degree in Economics from Messiah College in Grantham, Pennsylvania.

Brett lives in Austin with his wife, Cathryn, and two children. He enjoys reading, squash, classic movies, great food and wine, and the New England Patriots.

#corporatelaw #mergersandaquisitions #businesslaw #corporatelawyer

[whatdRaysay]

Really good information, happy someone is able to easily clear things up for someone who is not as law savvy as yourself. Cant wait for more videos like this, definitely worth their weight in gold

[genera]

Love your way of explaining. Very clear and concise. Easy to understand. Thanks!

[josephselwan]

Great video. Was looking for what the Locked Box meant as I am taking an M&A course now. Subscribed as well

[adityanigam]

Sir...since when cash is included in working capital? It is reduced from debt

[wallstreetbravado]

This was an exceptional video. I’m glad to see your posting on a regular basis. Your a YouTube rising star. ⭐️ #WallStreetBravado

[abisheshlama]

Thank you for this. Videos like these are really helpful.

[marcel]

Hi thank you for the video!
Im wondering about including cash in working capital, I heard on other sources that cash & equivalents should not be included in Net Working Capital since it’s not an operating asset.
Would you agree to this?

[gryeyy]

Hi Brett! What would you consider for a client entering a share-for-share merger (resulting in a NewCo) as a minority shareholder? Transac will take 6mo-1yr and client also has debt!

[alikhalil]

Thank you man! Ali Khalil (LAWYER) from Lebanon.

[martinsupancic]

How are Permitted Leakages handled in the lockbox approach? Any amounts >X USD need clearance from buyer for seller to pay the amount? Setting the amount too low or not setting an amount at all may mean each payment, regardless of amount, requires approval, which could be quite cumbersome from the administrative perspective. thanks!

[lucasqueiroz]

Great video! I have a question, in case you set a working capital target, can't we just set a range, a minimum and maximum working capital level? I mean, just to avoid new payments during the closing date

[felixdiluciano]

hey! i´m about to get a law degree here in argentina and i´m looking forward to work in the USA, the thing is that the bar exam seems to be absolutly hard for foreign lawyers, so i was thinking, isn´t there the posibbility for people like me to do the LLM on corporate law and stay working there? maybe as a consultant in a firm, or i don´t know, any advice will be apreciated, i really want to live in the USA!
great video by the way! it was really informative!

[ShakespeareGrace]

Hi Brett - awesome video. Anyway to contact you privately ?

[tyronfoston]

Any chance you can do one on IT diligence?

[saidalabed]

I don't really understand something. EV is Market Value+Debt-Cash. Why not just concentrate on the cash that the business should have on its balance sheet on the date of closing ? Why introduce the short term liabilities into it? Aren't they going to be paid off with the rest of debt?

[tonytran]

do you have any examples or articles involved in Unfinished M&A deal?