🌟 Hello, Reader

As we embark on 2026, KSMC extends warm wishes for a year brimming with breakthrough opportunities and exponential success!

Welcome to Issue 16 of Double Klick, your bi-weekly briefing on M&A, finance, and AI innovation. This new year edition launches our 2026 coverage with fresh momentum, as we navigate the dynamic landscape of dealmaking, economic conditions and technological transformations.

Let's dive into what's shaping the year ahead.

Warm regards,
Kapil Sukhija
Founder, KSMC

📊 Deal Strategy Deep Dive

Working Capital Pegs and Hidden “Debt‑Like” Items

In our last issue, we covered Quality of Earnings (QoE), including a Net Working Capital example. This issue dives deeper into working capital pegs and debt-like purchase price adjustments.

What This Means: Net Working Capital (NWC) is a negotiated lever that directly influences purchase price through the working capital peg. The peg represents the normalized level of operating working capital a business needs, and is negotiated during the due diligence exercise using the most recent 12–24 months average to strip out seasonality and unusual items. Closing NWC is measured as of closing date using preliminary estimates, with final true-up adjustment 60-120 days post-close.

In a cash‑free, debt‑free deal, NWC is usually defined as current assets (excluding cash) minus current liabilities (excluding debt and agreed debt‑like items), and deviations from the peg at closing drive dollar‑for‑dollar price adjustments.​ In summary, If closing NWC < peg, seller pays buyer (decreases purchase price). If closing NWC > peg, buyer pays seller (increases purchase price).

The complexity lies in deciding what belongs in “operating” working capital versus what should be treated as debt‑like. Long‑dated or non‑operating obligations—such as environmental reserves, large warranty provisions, certain deferred revenue, or tax exposures—often behave more like debt in economic terms. If they remain inside working capital, they can distort the peg and blur accountability for future cash outflows; if reclassified as debt‑like, they reduce equity value or are settled by the seller outside the peg.

Common Challenges:

• Seasonality and growth are not properly captured, leading to pegs set off a peak or trough period rather than a representative average of business needs

• ​Deferred revenue, customer deposits, and prepayments are treated inconsistently across the NWC definition, the EV‑to‑equity bridge, and the purchase agreement, creating ground for post‑close disputes​

• Slow‑moving inventory, obsolete stock, and inadequate reserves for bad debts overstate the quality of current assets and inflate “true” NWC, which can quietly shift value from buyer to seller.​

• Changing cut‑off policies (e.g., received‑not‑invoiced, accruals) during the review period are not documented, obscuring trends in payables and accruals used to set the peg​

• Generic SPA definitions of “net working capital” and “indebtedness” do not reflect how specific accounts (warranties, environmental, taxes, deferred revenue) are actually treated in the peg and debt‑like schedule

Real Deal Context: One of our clients acquired an industrial manufacturing company in a cash-free, debt-free transaction where the target carried historical environmental exposure and longer-term product warranties.

During our due diligence, we identified sizeable environmental and warranty reserves in "accrued liabilities"—treated as current liabilities and included in historical NWC. Management noted these obligations would resolve over years but argued they were part of normal operations and embedded in historical financials.

The buyer pushed to reclassify them as debt-like items for the EV-to-equity bridge. The parties agreed to:

• Restate 12 months of NWC excluding these reserves, raising the normalized NWC and supporting a higher working capital peg for true operating needs​

• Add the reserves to a debt-like schedule with a downward equity adjustment​

• Fund a modest escrow for potential tail risk above booked amounts.

This preserved buyer protection and seller economics without renegotiating headline value.

Suggested Success Factors:

• For buyers: Build the peg from a monthly NWC time series that reflects the final, agreed definition of working capital, explicitly separating recurring operating accruals from true debt‑like exposures in a dedicated schedule

• For sellers: Prepare a working capital memo early that explains reserves, cut‑off practices, seasonality, and any recent changes, and use it to support both the peg and the argument for what should remain in operating NWC versus become debt‑like​

• For both parties: Lock definitions of net working capital, cash, and debt‑like items at LOI and mirror them in SPA exhibits; consider collars (or, pre-agreed buffers, such as, no adjustment unless NWC is more than 10% off target) around the peg, to avoid disputes over minor timing differences​

• For advisors: Integrate the working capital analysis with the EV‑to‑equity bridge and QoE findings so that cash conversion, reserves, and peg methodology tell a consistent economic story from diligence through closing

Share Your Perspectives: Have you encountered a situation where reclassifying an item between NWC and debt‑like materially changed the deal economics? How did you resolve it?

🌍 Global Pulse

The ‘Frenemy’ Pact of the Decade: How Google Gemini Will Supersize Siri

For nearly two decades, Apple and Google have fought a bitter war for supremacy in mobile technology. But the immense pressure of the Generative AI arms race has forced an unthinkable truce.

In a move that has fundamentally reshaped the mobile landscape, Apple has announced a partnership with Google to integrate the powerful Gemini model into iOS, macOS, and iPadOS, finally giving Siri the “brain transplant” it desperately needed.

The Two Tier ‘Brain’ Coming To Your iPhone

• Tier 1 (Apple Intelligence): For personal context—summarizing your notifications, finding that photo from last Tuesday, or proofreading an email—Apple's own models handle the job securely on your device

• Tier 2 (Google Gemini): When you ask Siri a complex, world-knowledge query—like "Create a three-day vegetarian meal plan using seasonal vegetables" or "Explain quantum computing to a five-year-old"—Siri will ask for permission to send that query to Google Gemini in the cloud

Why This Matters?

• The End of the ‘Siri Problem’: By outsourcing complex queries to one of the current market leaders in AI, Apple will instantly close its biggest feature gap without having to build an LLM equal to Gemini from scratch

• Google Wins the Distribution War: Google may have been late to the GPT party, but they just secured the ultimate prize: placement on Apple's 2 billion+ active devices. Reports suggest Apple will pay Google approximately $1 billion annually for this integration

The Bottom Line

The smartphone landscape continues to evolve rapidly as the AI era takes hold. In this new reality, even the fiercest rivals have realized that collaboration may be the best way to keep pace with rapid technological change. Your iPhone is still designed in Cupertino, but its best new ideas will soon be powered by Mountain View.

🤖 AI Tools Spotlight

Gmail's New AI Features

Gmail has introduced AI-powered tools designed to transform the world's most popular email service into an intelligent personal assistant. Announced recently, these features leverage Google's Gemini 3 AI model to enhance writing, organization, and inbox management for over 3 billion users worldwide.

What The Tool Does?

• AI-assisted email writing with "Help Me Write" that learns your personal writing style and offers real-time suggestions to polish messages

• Conversational inbox search allowing users to ask questions in natural language to retrieve information from emails (available to Pro and Ultra subscribers)

• "AI Inbox" that automatically analyzes your inbox to suggest daily to-do lists and topics worth exploring (currently in testing phase)

• Privacy Promise: Google guarantees that inbox content analyzed by AI won't be used to train models, with engineering safeguards protecting user information

• Availability: Initially launching in English within the US, with global expansion planned throughout 2026.

Why It Matters?: Email remains the cornerstone of professional communication, yet inbox overload and time-consuming email composition drain productivity across every industry. For professionals managing client relationships, coordinating projects, and maintaining consistent outreach, AI-powered email assistance can reclaim valuable hours while preserving the personal touch that builds trust and drives results.

Did you know?: You can extend Gmail's "Undo Send" feature up to 30 seconds in Settings > General > Undo Send. This gives you a half-minute safety net to catch typos, missing attachments, or wrong recipients before it's too late!

💭 Dealmaker’s Quote

“Yesterday is gone. Tomorrow is a mystery. Today is a gift. That’s why it’s called the present.”

— Bil Keane

🏢 About Us

KSMC is a Toronto-based boutique advisory firm founded by Big 4 alumni driven by an entrepreneurial and innovative vision. We provide comprehensive M&A Advisory Services, strategic CFO Consulting, and tailored Accounting Solutions. Our expertise and network spans the complete transaction lifecycle—from financial due diligence (QoE reviews) and business valuations to full sell-side mandates—serving middle-market clients across industries in Canada, U.S., UAE, India, Puerto Rico, and Botswana.

Know more and reach out to us here.

Disclaimer: This newsletter is provided for informational purposes only and does not constitute any form of advice. We do not have any sponsorship, affiliate, or commercial arrangements with any companies, tools, or services mentioned in this newsletter. All examples and case studies are based on publicly available information and are included for educational purposes only.