Youtube Video – https://youtu.be/eZs8gXcKwzU Hello, first of all Happy New Year to everyone. We survived 2020 – what a year it has been. New year new beginnings. So, what happens to all of the accounts receivables after the closing. You, as a seller has two choices when it comes to this topic.
As part of the contract negotiation between the attorneys or even between the selling and the buying party the accounts receivables and accounts payables are discussed. Often times, both of them will carry over after the closing in favor of the seller.
The simplest arrangement would be for the seller to take the accounts receivables and the accounts payables after the closing. What that means is that any work that was done where the payments are expected after the closing and any and all payments owed to vendors, etc. that are due after the closing will be the seller’s responsibility.
However, having said that, there is another arrangement that can be hashed out. If the buyer needs working capital, the buyer can negotiate that, the accounts receivables stay with the company. This way the work that was done under the seller will be applied to the buyer, which will be used as working capital. Although not a lot of sellers will allow this. We have seen this happen if the price offered to purchase the business is at or above the asking price. Which the seller is content with. As mentioned before these are the 2 likely scenarios for the accounts receivables.
For more info on M&A or if you have any specific question please don’t hesitate to contact us or visit https://gillagency.co