The net working capital peg is the target figure a Canadian purchase agreement fixes in advance, so that closing day is only when a pre-agreed methodology gets applied — not a number either side negotiates on the day itself.
Canadian practice is explicit that nobody decides the number on the day itself: "neither party unilaterally decides on closing day" — instead, the purchase agreement should pre-define the methodology, the target figure and the process before closing, so that closing day is when the pre-agreed mechanism is applied for the first time, not negotiated. The process runs: the seller prepares an estimated closing statement using the accounting policies the agreement has already fixed; the price is adjusted at closing using that estimate; the buyer reviews the actual figures once full records exist; and disagreements go to an independent accountant.
Most true-up disputes are not arithmetic disputes at all: the fights center on which accounting policies apply, and which one wins if the agreement's own specified policies conflict with GAAP. "Say so expressly, because that conflict is where most true-up money is won and lost" — meaning the peg is only as reliable as the accounting-policy language that defines how it is calculated, not just the dollar figure itself.
A fund's diligence team reviews a target's trailing 12 months of monthly working-capital figures and sets the peg at $1.8M, matching the seasonally normalized average rather than a single month's snapshot. The purchase agreement states the peg is calculated on the same accounting policies the target has used consistently for the past three years, and specifies GAAP governs anywhere the agreement is silent. At closing the estimate lands at $1.95M, so the fund pays $150,000 above the base price; the completion accounts prepared 60 days later confirm the same figure, and no further true-up payment is owed either way.
See also: Completion accounts · Purchase price true-up · Locked-box mechanism.
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