Price Adjustment: Net Debt, Normalised Working Capital and Top-Ups

Quick answer. The price paid for the shares is not the enterprise value: you move from one to the other by deducting net debt and correcting the gap between actual working capital and a normalised level. Two mechanisms frame this move: the locked box (price fixed on a dated reference balance sheet) and completion accounts (adjustment after accounts drawn up at the completion date). Understanding these notions avoids being tens of thousands of euros wrong on the final price.

A common confusion costs both seller and buyer dearly: enterprise value is not the price of the shares. Enterprise value (often derived from an EBITDA multiple or a discounted cash flow) measures the value of the economic asset, regardless of how it is financed.

The share price is what the buyer pays the shareholders. You reach it by starting from enterprise value, then deducting net debt and adjusting working capital. This is the "cash free, debt free" principle: the buyer takes over the business without its surplus cash or its financial debt, which go back to the seller or come off the price.

Net debt brings together financial debt (bank loans, shareholder current accounts, finance leases, overdrafts) less the cash actually available. The higher the net debt at the completion date, the lower the share price, for a given enterprise value.

The issue is to agree on the scope: some items sit on the border between debt and operations (overdue tax and social liabilities, provisions, pension commitments, declared but unpaid dividends). Each item reclassified as net debt reduces the price accordingly. This is often where the fine negotiation plays out, which is why preparing the reference accounts is decisive.

Working capital funds the operating cycle: inventory and trade receivables, less trade payables. It varies through the year, driven by seasonality. The buyer expects to receive the business with a "normal" working capital, enough to run without injecting cash the day after the purchase.

A normalised working capital is therefore defined, generally a twelve-month average restated for exceptional items. At the completion date, actual working capital is compared with the normalised target: working capital above target raises the price (the seller leaves more resources in the business), below target lowers it. A sale set at a seasonal low, without adjustment, would shortchange the buyer; hence the importance of making the target objective.

French law requires the price of a sale to be determined or, at least, determinable by objective elements (Articles 1591 and 1592 of the Civil Code). Adjustment clauses meet this requirement in two opposite ways.

In the locked box, the price is set on a reference balance sheet and no longer moves; a fee for the elapsed time (ticking fee) can compensate the seller until closing. In completion accounts, accounts are drawn up at the completion date, then the adjustment is calculated and paid afterwards, which requires a contested review and, in case of disagreement, recourse to a third-party expert.

Take a business valued at 4,000,000 euros (enterprise value). At the completion date, it carries 1,200,000 euros of financial debt and holds 300,000 euros of available cash: its net debt is 900,000 euros. Its actual working capital is 650,000 euros, against a normalised target of 600,000 euros: the 50,000-euro gap raises the price, as the seller leaves more resources in the business.

The share price therefore comes to 3,150,000 euros, 850,000 euros below the headline enterprise value. A seller who reasoned on the 4-million figure alone would have overestimated what they would receive. Conversely, a buyer who neglected the working-capital adjustment could find themselves having to inject cash from day one. This example shows why the contractual definition of net debt and normalised working capital, line by line, is often worth more than the discussion on the multiple itself: that is where the tens, even hundreds, of thousands of euros that separate an announcement from a price actually received are located.

Highly seasonal business. The choice of completion date and the definition of normalised working capital become decisive; a completion-accounts mechanism protects better against seasonality.

Large surplus cash. Under cash free, debt free logic, this cash goes back to the seller or adds to the price; distinguish the cash actually available from that needed for operations.

Earn-out top-up. Beyond the technical adjustment, part of the price may depend on future results; its formula must rest on a verifiable metric to avoid disputes, and its payment is prepared like a vendor loan.

• Define the net-debt scope precisely in the protocol: each contested item weighs directly on the price.
• Make normalised working capital objective on a restated twelve-month basis, not on a single favourable point.
• Choose the right mechanism: locked box for simplicity and security, completion accounts to match reality at completion.
• Anticipate tax: the adjustment changes the price, hence the gain taxed in the year of closing (31.4% for a sale of shares in 2026).

Recently, a seller thought they were selling "for 4 million", the figure stated in the letter of intent. After defining net debt and adjusting working capital, the share price came out noticeably lower, because shareholder current accounts and deferred social liabilities had been reclassified as debt. The seller experienced it as a bad surprise, when it was simply the normal application of the mechanism. Upstream modelling would have avoided the misunderstanding.

This is exactly the accountant's role in this phase: translating enterprise value into the price actually received, defining net debt and normalised working capital with the buyer, and preparing indisputable reference accounts. A sale price is never just a multiple; it is built line by line.

This work of moving from value to price is, in our view, the heart of the accountant's role in a sale. It is not a theoretical exercise: every definition retained in the protocol — what goes into net debt, how normalised working capital is computed, which adjustment mechanism applies — translates immediately into euros in the seller's account. We see too many owners focus on the multiple obtained in the letter of intent and neglect these definitions, only to discover at closing a price very different from the one they had in mind. Conversely, a seller who masters these mechanisms negotiates on equal terms with the buyer and their advisers, without suffering the information asymmetry. It is that mastery we pass on, as much as the calculation itself.

Hayot Expertise advice. Never reason on enterprise value alone: from the letter of intent, require a model of the move to the share price (net debt, normalised working capital, chosen mechanism). You will avoid the disappointment at closing and negotiate each item knowingly. We build this bridge between value and price, and prepare the reference accounts.