Seeking Advice on Determining Cash to remain in business for a Seasonal Business Acquisition

18d (edited) • 🚀ACQUISITION CASE-STUDIES 🚀

Hello everyone,

I would appreciate your insights on a specific point in my current negotiations.

I am in the process of acquiring a distribution business in the mountain sports sector, which has predictably high seasonality. The planned handover date is in March, which marks the beginning of the off-season.

My key concern is determining the appropriate amount of cash (or net working capital) that should remain in the business at closing to ensure smooth operations through the low season until revenues pick up again.

I want to do something simple, so my initial thought was to simply use the historical monthly bank balance as a proxy to identify the annual low point in the cash cycle. Or should I only consider the working capital requirement, eventually just calculated on the off season? It might trigger a price adjustment and I was trying to avoid that, but maybe there s no way around....

Has anyone dealt with a similar situation in acquiring a seasonal business? What methodologies or benchmarks did you find effective in defining the right "cash on hand" requirement?

Thank you in advance for your input.

Best regards,Philippe

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