Assess whether working capital should be a walk-away (a65396)

SITUATION A live M&A Due Diligence Legal, IP, and Regulatory file in a strategic buyer looking at a carve-out from a conglomerate now turns on carve-out stranded-cost model after a Phase II that found groundwater impact. Working-capital true-up analyst should state what that extract proves for whether working capital should be a walk-away.

DECISION Working-capital true-up analyst in a strategic buyer looking at a carve-out from a conglomerate must choose Proceed / Reprice / Walk / Hold using carve-out stranded-cost model after a Phase II that found groundwater impact.

HYPOTHESES TO TEST 1. A Phase II that found groundwater impact is noise around an already-controlled Legal, IP, and Regulatory process in a strategic buyer looking at a carve-out from a conglomerate, given carve-out stranded-cost model. 2. A Phase II that found groundwater impact is the event in carve-out stranded-cost model that forces Proceed for working-capital true-up analyst under M&A Due Diligence. 3. Carve-out stranded-cost model shows a one-file miss after a Phase II that found groundwater impact, not a Legal, IP, and Regulatory program failure. 4. Carve-out stranded-cost model cannot decide working capital should be yet after a Phase II that found groundwater impact; hold is the only M&A Due Diligence close a strategic buyer looking at a carve-out from a conglomerate can defend.

ANALYSIS REQUIRED 1. Tie quality-of-earnings, working-capital, and contingent items in carve-out stranded-cost model to working capital should be. 2. Name the document working-capital true-up analyst still needs before signing. 3. Test whether a Phase II that found groundwater impact is a diligence gap, a price chip, or a walk-away. 4. For this M&A Due Diligence Legal, IP, and Regulatory file, read carve-out stranded-cost model against a Phase II that found groundwater impact and write the one fact that would move working capital should be for working-capital true-up analyst.

RECOMMENDATION Choose Proceed / Reprice / Walk / Hold on this M&A Due Diligence / Legal, IP, and Regulatory packet (carve-out stranded-cost model after a Phase II that found groundwater impact). The follow-on Legal, IP, and Regulatory action is what working-capital true-up analyst does next: implement the option, assign an owner, and log the missing fact.

COMMAND RETURNS - Bottom-line M&A Due Diligence option on working capital should be, then the evidence in carve-out stranded-cost model, then the action for working-capital true-up analyst - Hypothesis scorecard against carve-out stranded-cost model: supported / rejected / untestable - What changes working capital should be if a Phase II that found groundwater impact is later withdrawn - Named option among Proceed, Reprice, Walk and the fact that kills the others