medium · Private Equity value-creation
If a company has a highly seasonal business, how might a buyer and seller adjust the peg methodology?
- By using a seasonally-adjusted average or a specific 'reference' month that matches the closing date.
- By skipping working capital adjustments altogether during the seller's slower off-season months
- By doubling the peg during high-demand months to ensure the buyer retains extra liquidity
- By setting the peg equal to the highest point reached in the prior year's inventory build-up cycle
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