A signed purchase contract sets the price and terms on what the buyer knew that day. Diligence turns up more, and when a finding changes the value of the business, the risk after closing or the timeline, the buyer can ask to reopen the terms. While the diligence period is open and the contract lets the buyer terminate inside it, a seller who refuses can lose the sale. After the period closes, that threat is mostly gone.
Verizon and Yahoo reopened a signed deal in 2017. Yahoo had disclosed data breaches while the sale was pending, and in February the two companies amended their agreement: the price came down by $350 million, and Yahoo took on half of certain breach liabilities (joint news release filed with the Securities and Exchange Commission). The renegotiation guide tells that case from the filings, then takes a small cleaning company, labeled as made up, through the same moves.
Before the call, the buyer writes down a walk-away point, the fallback that Roger Fisher and William Ury, in their 1981 book Getting to Yes, named a party's best alternative to a negotiated agreement. During the call, each concession is said out loud as a cost, which Deepak Malhotra of Harvard Business School calls labeling a concession.
The dollar value of a finding is a pricing question these pages leave alone. They cover what the buyer says to the seller, what gets traded for what and how the result is written down: a summary the same day, then an amendment signed as the contract requires, with any new dates added to the deadline register. If no trade works, the buyer can end the deal under the contract's terms before the diligence date passes.
The dates behind these conversations are on the due diligence pages, and the wire at the end of a deal is on the closing pages.
Reading path
- How to renegotiate after due diligence finds a problem
What gets said to the seller when diligence turns up something new, and how the trade that follows ends up in a signed amendment.