Signing a letter of intent is an important milestone in a business sale, but it is not the closing.
Between the LOI and the final transaction, the buyer will typically conduct due diligence to confirm the financial, operational, legal, and other information used to evaluate the business. Sometimes that process uncovers information that legitimately changes the deal’s economics.
Other times, a buyer may attempt to improve the terms after the seller has already invested significant time and potentially money in the transaction or entered an exclusivity period.
That distinction matters.
A request to change the deal does not automatically mean the buyer is acting unreasonably. It also does not mean the seller should accept the change simply because the transaction has already been underway for several months.
The first question should be:
What changed since the LOI was signed, and does that change justify the buyer’s request?
Why Buyers Change Deals During Due Diligence
An LOI is generally based on the information available to the buyer at that point in the process. Due diligence lets the buyer examine that information in much greater detail.
Sometimes the business looks different under that closer examination.
Financial performance may decline while diligence is underway. A major customer could leave. Revenue projections may no longer appear realistic. EBITDA adjustments or add-backs the seller presents may not withstand scrutiny.
Other issues can emerge around working capital, debt-like items, contracts, customer concentration, or other financial obligations.
Financing conditions can change as well.
And sometimes nothing material has changed in the business. The buyer may simply reconsider the valuation and decide that the original offer was too aggressive.
These situations should not all be treated the same way.
If a business loses its largest customer after signing the LOI, for example, the buyer may have a legitimate reason to reconsider the transaction’s economics. That differs from a buyer trying to reduce the price based on information it already knew before submitting the LOI.
Key takeaway: A changed deal is not automatically a retrade. Start by identifying what new information emerged and whether it materially changes the transaction’s economics or risk.
When Does a Change Become a Retrade?
A retrade occurs when a buyer attempts to renegotiate previously agreed economics or other material terms after the seller has become committed to the transaction, often during the exclusivity period, without a proportional change in the underlying facts to support the new terms.
Exclusivity can make this especially important.
Once a seller signs an LOI with an exclusivity provision, the business may be restricted from negotiating with other potential buyers for a specified period. Other interested parties may move on, and the seller may have already spent substantial time and money completing diligence.
That can change the negotiating dynamic.
The seller now has more invested in closing the transaction, and walking away may mean starting the process again.
But determining whether a buyer’s request is reasonable should not depend solely on whether someone calls it a retrade.
Look at the facts.
What information does the buyer have today that it did not have when the LOI was signed? How significant is that information? And how closely does the proposed adjustment correspond to the actual issue?
Key takeaway: Focus less on the label and more on whether new information reasonably supports the buyer’s proposed change.
Purchase Price Is Not the Only Thing That Can Change
When sellers hear that a buyer wants to change a deal, they may immediately think about a lower purchase price.
But a buyer can change a transaction’s economics without substantially changing the headline valuation.
The buyer might propose:
- More of the purchase price as an earnout
- A larger seller note
- Less cash paid at closing
- A larger escrow or holdback
- New or expanded indemnification requirements
- Different working capital adjustments
- Changes to other closing adjustments
Consider a hypothetical buyer that originally offered $10 million with most of the consideration paid in cash at closing.
If the buyer later keeps the $10 million headline price but moves $2 million into an earnout tied to future performance, the seller is not receiving the same economic deal.
The headline number may be unchanged, but the amount, timing, and certainty of what the seller receives have changed considerably.
This is why sellers should compare the entire deal structure, not just the stated purchase price.
Key takeaway: A buyer does not have to lower the headline valuation to change a transaction materially. Cash at closing, contingent payments, seller financing, escrows, and other terms all affect the deal’s economics.
How Should a Seller Evaluate the Request?
When a buyer proposes changing material terms, the seller should resist the temptation to respond immediately.
Instead, break the request into a series of questions.
What New Information Actually Changed?
Ask the buyer to identify the specific issue driving the request.
A general statement that the business now appears “riskier” is far less useful than identifying a specific customer loss, earnings adjustment, working capital issue, or performance change.
The more specific the issue, the easier it becomes to evaluate its impact.
Was the Issue Known Before the LOI?
Timing matters.
If the buyer had access to the relevant information before signing the LOI, the seller should understand why that same information now justifies different terms.
That does not automatically make the buyer’s request unreasonable, but it is an important part of evaluating the explanation.
How Large Is the Financial Impact?
Whenever possible, quantify the issue.
Suppose diligence determines that normalized EBITDA is $100,000 lower than originally presented.
That creates a financial question to analyze.
The seller and advisors can examine the actual impact rather than negotiating around a vague concern.
Is the Proposed Adjustment Proportional?
Even when the buyer identifies a legitimate issue, evaluate the proposed solution independently.
A real problem does not automatically justify any adjustment the buyer proposes.
If the buyer identifies a specific financial impact, ask whether the requested reduction or structural change reasonably corresponds to that impact.
What Alternatives Does the Seller Still Have?
The buyer’s proposal is not necessarily the seller’s only option.
Depending on the circumstances, the seller might negotiate the adjustment, propose a different structure, reject the change, terminate the transaction, or potentially return to other interested buyers.
The strength of those alternatives will depend heavily on decisions made earlier in the sale process.
Key takeaway: Evaluate a changed deal by identifying the new information, quantifying its impact, and comparing that impact with the adjustment the buyer is requesting.
Don’t Negotiate Based on the Time You’ve Already Spent
By the time a buyer attempts to change a deal, the seller may have spent months working toward closing.
Management has answered diligence requests. Accountants have prepared information. Attorneys have reviewed documents. The owner may have spent countless hours away from running the business.
That investment can make walking away feel increasingly difficult.
But the amount of time already spent on a transaction does not determine whether the revised terms are acceptable.
The relevant question is what the deal looks like today.
If the revised transaction still makes sense, continuing may be the right decision. If the economics have changed materially, the seller should evaluate the new deal on its own merits rather than accepting unfavorable terms solely because of the time already invested.
The same principle works in the other direction. A buyer asking for a change does not automatically mean the seller should terminate an otherwise attractive transaction.
The goal is to make a business decision, not an emotional one.
Key takeaway: Evaluate the revised transaction based on its current economics and risks, not simply on how much time or money has already been invested in getting there.
The Best Protection Against a Retrade Starts Before the LOI
Many of the decisions that determine a seller’s leverage after the LOI are made before it is signed.
Make Sure the Financials Are Supportable
Review EBITDA, SDE, add-backs, revenue, margins, customer concentration, and other key financial information before the business goes to market.
The more issues discovered in advance, the fewer surprises a buyer is likely to encounter during diligence.
Understand the Buyer’s Ability to Close
Price is only one part of evaluating an offer.
Sellers should also understand how the buyer expects to fund the transaction and whether the buyer has the financial resources and experience necessary to complete it.
Compare Deal Structure, Not Just Valuation
A higher offer isn’t necessarily better if substantially more consideration depends on an earnout, seller financing, or other contingent terms.
Compare offers based on overall economics and risk to the seller.
Negotiate a Detailed LOI
Ambiguity can create opportunities for disagreement later.
The more clearly the LOI addresses key economic and structural terms, the easier it becomes to identify when a later proposal meaningfully departs from what was originally agreed.
Be Thoughtful About Exclusivity
Buyers reasonably want enough time to complete diligence and negotiate definitive agreements.
But unnecessarily long exclusivity periods can reduce a seller’s leverage by keeping other buyers out of the process for longer than necessary.
Maintain Competitive Tension Where Possible
A seller with credible alternatives generally has more leverage than a seller whose entire process depends on one buyer.
That does not mean negotiating simultaneously with multiple parties after agreeing to exclusivity. It means running the process in a way that preserves credible backup options before exclusivity begins.
Key takeaway: The best time to protect against a difficult late-stage renegotiation is often before signing the LOI, when the seller still has the greatest flexibility and leverage.
A Changed Deal Does Not Necessarily Mean the Deal Is Over
Not every adjustment discovered during diligence should become a confrontation.
Businesses change. New information emerges. Financial results move. Diligence sometimes identifies issues that neither side fully understood when the LOI was negotiated.
A reasonable buyer may have a legitimate reason to revisit a term.
Sellers should avoid reacting emotionally to a proposed change. A request for different terms does not automatically mean the transaction should be terminated, just as months invested in a deal do not mean every proposed change should be accepted.
The seller’s job is to understand the reason for the request, quantify the issue, and determine whether the proposed solution is proportional.
There may also be ways to solve the disagreement through structure rather than simply reducing the purchase price.
The right response depends on the transaction’s facts, the issue’s magnitude, the seller’s alternatives, and whether the revised economics still accomplish the seller’s objectives.
An LOI Is a Milestone, Not the Closing
Signing an LOI can feel like the most important hurdle in selling a business has been cleared.
In reality, substantial work remains.
Due diligence still has to be completed. Definitive agreements have to be negotiated. Closing adjustments may need to be calculated. Issues can emerge that change what one or both parties originally expected.
That possibility is one reason preparation before going to market matters so much.
Supportable financials, a carefully evaluated buyer, a well-negotiated LOI, reasonable exclusivity, and credible alternatives can all put the seller in a stronger position if the terms are challenged later.
If a buyer asks to change the deal, the seller doesn’t have to accept the request or automatically walk away.
Start with a simpler question:
What actually changed since we agreed to the LOI, and does that change justify the new terms?