The Importance of Working Capital in Lower-Middle-Market Acquisitions

By INFRANOVA Capital · October 2026

In smaller businesses, cash tied up in stock, work-in-progress and debtors often decides whether an acquisition works. Two companies with identical profits can have very different cash needs.

Normalised working capital, seasonal swings and customer and supplier payment terms all shape the price paid and the financing available. Agreeing a fair working capital level is often one of the most important parts of a transaction.

After completion, improving working capital — tighter credit control, better stock planning and sensible supplier terms — can release cash to reinvest in the business or reduce debt, without any change to day-to-day trading.

Sources: INFRANOVA Capital analysis. No external statistics are cited in this brief.

For information only. Not investment, tax or legal advice.