Really good information, happy someone is able to easily clear things up for someone who is not as law savvy as yourself. Cant wait for more videos like this, definitely worth their weight in gold
Hi thank you for the video! Im wondering about including cash in working capital, I heard on other sources that cash & equivalents should not be included in Net Working Capital since it’s not an operating asset. Would you agree to this?
How are Permitted Leakages handled in the lockbox approach? Any amounts >X USD need clearance from buyer for seller to pay the amount? Setting the amount too low or not setting an amount at all may mean each payment, regardless of amount, requires approval, which could be quite cumbersome from the administrative perspective. thanks!
Great video! I have a question, in case you set a working capital target, can't we just set a range, a minimum and maximum working capital level? I mean, just to avoid new payments during the closing date
for sure, you can do that. That is interesting that you set a range in your deals. Doesn't it generally come out at the bottom of the range? If the seller is in control of pre-closing working capital management, I would think that it would regularly tend toward the bottom of the range. I suppose you can use reps & warranties to put some structure around a seller's ability to do that (e.g., a rep that the seller will (or did) operate the company in the ordinary course of business). In the U.S., the working capital target is an exact amount. Since the seller is estimating the actual working capital as of the closing date, the buyer performs a post-closing calculation and the parties true-up the working capital (i.e., one of them makes a payment to the other in the amount of the difference between the working capital target and the actual working capital at closing. To me, the primary advantage of the locked box approach is that it reduces post-closing disputes. Do you have a lot of those around working capital issues? It is a big one in the U.S. It also shifts the risk of poor seller performance between signing and closing (the "gap period") to the buyer. That's a big deal, although I do not view that as the purpose of locked box, just a huge positive or negative (depending on what happens during that time) externality. BTW, I think I said this in the video, although in case I did not, we rarely see locked box deals in the U.S., although I expect them to gain a little more traction in the future
Yeah, here there are also many discussions regarding the working capital! Excellent explanation! Brett thank you so much for all the effort that you put into your videos/channel to share with us your knowledge.
Brett Cenkus “unfinished” means that two firms may have signed a financial agreement, but they have not yet start working together so the success or failure of the deal is still unknown.
Brett Cenkus oh after i watch your video and read the term unfinished M&A deal in the book, I’m curious to find any real proof or articles on online to prove the point. I’m curious to know any firms that really did “unfinished” . That is why I wonder if you know any firms really did that?
hey! i´m about to get a law degree here in argentina and i´m looking forward to work in the USA, the thing is that the bar exam seems to be absolutly hard for foreign lawyers, so i was thinking, isn´t there the posibbility for people like me to do the LLM on corporate law and stay working there? maybe as a consultant in a firm, or i don´t know, any advice will be apreciated, i really want to live in the USA! great video by the way! it was really informative!
thank you for the feedback, Felix! I'm not sure about the work visa issues you'd run up against, although I don't believe that getting an LLM would get you around needing to take the bar in any state where you want to practice. It would give you time to come up to speed on some of the bar exam materials. Regarding the consulting angle, I'm aware that there is a foreign legal consultant (FLC) certification in some states, although I don't much about that either. I think it would give you the right to advise clients in that (those) states on the laws of Argentina, although I may be wrong about that. I'd be interested in hearing what you find out about the FLC!
I don't really understand something. EV is Market Value+Debt-Cash. Why not just concentrate on the cash that the business should have on its balance sheet on the date of closing ? Why introduce the short term liabilities into it? Aren't they going to be paid off with the rest of debt?
Said, accounts payable are often not settled at closing, even on asset purchases. On stock purchases, where everything goes with the deal (unless it's carved out), we commonly see all sorts of things not paid at closing and factored into the purchase, including other short-term liabilities such as taxes payable and accrued expenses. Generally speaking, the higher the transaction amount, the more stuff seems to carry over (be left for or transferred to the new buyer). Typical debt (e.g., loans) are an exception. We usually take care of those at closing, although even there, that is not always the case.
Really good information, happy someone is able to easily clear things up for someone who is not as law savvy as yourself. Cant wait for more videos like this, definitely worth their weight in gold
thank you, Ray. I appreciate the solid feedback. More content on the way!
Great video. Was looking for what the Locked Box meant as I am taking an M&A course now. Subscribed as well
I'm glad this video helped with you course. Thank you for watching it and subscribing!
Love your way of explaining. Very clear and concise. Easy to understand. Thanks!
You're welcome!
Sir...since when cash is included in working capital? It is reduced from debt
Hi thank you for the video!
Im wondering about including cash in working capital, I heard on other sources that cash & equivalents should not be included in Net Working Capital since it’s not an operating asset.
Would you agree to this?
This was an exceptional video. I’m glad to see your posting on a regular basis. Your a TH-cam rising star. ⭐️ #WallStreetBravado
thank you for the great feedback! Yes, I will be posting much more regularly going forward
Brett Cenkus You’re Welcome.
Thank you for this. Videos like these are really helpful.
really well explained! thanks!
You're welcome!
How are Permitted Leakages handled in the lockbox approach? Any amounts >X USD need clearance from buyer for seller to pay the amount? Setting the amount too low or not setting an amount at all may mean each payment, regardless of amount, requires approval, which could be quite cumbersome from the administrative perspective. thanks!
Great video! I have a question, in case you set a working capital target, can't we just set a range, a minimum and maximum working capital level? I mean, just to avoid new payments during the closing date
Btw I'm from Brazil, just found your channel and you have a new subscriber, thanks for the amazing videos
for sure, you can do that. That is interesting that you set a range in your deals. Doesn't it generally come out at the bottom of the range? If the seller is in control of pre-closing working capital management, I would think that it would regularly tend toward the bottom of the range. I suppose you can use reps & warranties to put some structure around a seller's ability to do that (e.g., a rep that the seller will (or did) operate the company in the ordinary course of business). In the U.S., the working capital target is an exact amount. Since the seller is estimating the actual working capital as of the closing date, the buyer performs a post-closing calculation and the parties true-up the working capital (i.e., one of them makes a payment to the other in the amount of the difference between the working capital target and the actual working capital at closing. To me, the primary advantage of the locked box approach is that it reduces post-closing disputes. Do you have a lot of those around working capital issues? It is a big one in the U.S. It also shifts the risk of poor seller performance between signing and closing (the "gap period") to the buyer. That's a big deal, although I do not view that as the purpose of locked box, just a huge positive or negative (depending on what happens during that time) externality. BTW, I think I said this in the video, although in case I did not, we rarely see locked box deals in the U.S., although I expect them to gain a little more traction in the future
Yeah, here there are also many discussions regarding the working capital!
Excellent explanation! Brett thank you so much for all the effort that you put into your videos/channel to share with us your knowledge.
@@lucasqueiroz5622 you're welcome!
do you have any examples or articles involved in Unfinished M&A deal?
Tony, can you reframe/restate your question? I'm not entirely clear on what you are looking for (or what an "unfinished" M&A deal is exactly)?
Brett Cenkus “unfinished” means that two firms may have signed a financial agreement, but they have not yet start working together so the success or failure of the deal is still unknown.
@@tonytran9538 Got it. What do you mean by "examples or articles" about that? Are you looking for specific issues that arise during that time?
Brett Cenkus oh after i watch your video and read the term unfinished M&A deal in the book, I’m curious to find any real proof or articles on online to prove the point. I’m curious to know any firms that really did “unfinished” . That is why I wonder if you know any firms really did that?
Any chance you can do one on IT diligence?
yes, I will add that to our list, Tyron.
@@BrettCenkus much thanks.
hey! i´m about to get a law degree here in argentina and i´m looking forward to work in the USA, the thing is that the bar exam seems to be absolutly hard for foreign lawyers, so i was thinking, isn´t there the posibbility for people like me to do the LLM on corporate law and stay working there? maybe as a consultant in a firm, or i don´t know, any advice will be apreciated, i really want to live in the USA!
great video by the way! it was really informative!
thank you for the feedback, Felix! I'm not sure about the work visa issues you'd run up against, although I don't believe that getting an LLM would get you around needing to take the bar in any state where you want to practice. It would give you time to come up to speed on some of the bar exam materials. Regarding the consulting angle, I'm aware that there is a foreign legal consultant (FLC) certification in some states, although I don't much about that either. I think it would give you the right to advise clients in that (those) states on the laws of Argentina, although I may be wrong about that. I'd be interested in hearing what you find out about the FLC!
Thank you man! Ali Khalil (LAWYER) from Lebanon.
You're welcome, Ali.
Thank you, this was super helpful!
Hi Brett - awesome video. Anyway to contact you privately ?
Thank you, Amber. The best (only) way to reach me is through a paid call at clarity.fm/brettcenkus
Great info
Great video!
thank you!
I don't really understand something. EV is Market Value+Debt-Cash. Why not just concentrate on the cash that the business should have on its balance sheet on the date of closing ? Why introduce the short term liabilities into it? Aren't they going to be paid off with the rest of debt?
Said, accounts payable are often not settled at closing, even on asset purchases. On stock purchases, where everything goes with the deal (unless it's carved out), we commonly see all sorts of things not paid at closing and factored into the purchase, including other short-term liabilities such as taxes payable and accrued expenses. Generally speaking, the higher the transaction amount, the more stuff seems to carry over (be left for or transferred to the new buyer). Typical debt (e.g., loans) are an exception. We usually take care of those at closing, although even there, that is not always the case.
Makes more sense to me now. Thanks Brett.
@@saidalabed9417 you're welcome, Said