Arcvue
M&A—the adjustment first-time sellers misread
You are not paid for your balance sheet. You are paid for your earnings.
Most owners going through a first transaction expect to be compensated for the equity sitting on their balance sheet. Enterprise value is a multiple of earnings, and the balance sheet is handled by two separate mechanisms instead. Arcvue puts your own balance sheet into the deal model, so the adjustment is a figure you have already seen rather than one you meet across a table.
The seller keeps the cash. The debt comes out of the proceeds.
Basis a worked cash-free, debt-free structure. Synthetic sample. This IS the seller being paid for the balance sheet—not as an addition to the price, but through what is kept and what is settled out of it.
Working capital is delivered at a normal level, not at whatever today happens to be.
The buyer is purchasing a business that can operate on day one, which means it needs receivables and payables at a normal level. So the parties agree a target—a peg—usually an average of recent months, and the price adjusts against it at closing.
- Deliver above the peg and the buyer pays the excess: you handed over more working capital than the business needs.
- Deliver below it and the price is reduced: the buyer must fund the shortfall to run the business you sold them.
Turning receivables into cash before close raises the cash you keep and lowers working capital delivered by the same amount. The peg adjustment takes it straight back. The balance sheet cannot be gamed in the last month; it can only be run well for years.
The structure modeled, not just the headline.
M&A carries cash, debt, and the working-capital peg through to the equity outcome, so the number an owner actually receives is visible alongside the number a banker quotes.