Closing Adjustment
Private Equity glossary · Valuation, Diligence, & Value Creation
Definition
A purchase-price adjustment at closing based on actual working capital, cash, and debt levels versus targets defined in the SPA.
Closing Adjustment in plain English
When you buy a company, you agree on a price months before you actually take the keys — but by closing day the business has changed: it has a bit more or less cash, some new bills, some new customer payments. A closing adjustment is the final tweak to the price that fixes these gaps, comparing the real numbers on closing day against the targets both sides wrote into the sale contract (the SPA, or share purchase agreement). It's like agreeing to buy a friend's car for a set price, then adjusting up or down at handover depending on how full the gas tank is and whether they left any unpaid parking tickets. This keeps either side from getting shortchanged by last-minute swings in cash, debt, or day-to-day working money.
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