When diligence turns up something the seller did not disclose, the buyer's options come from the purchase contract, and they are widest while a diligence period with a right to terminate is still open. Buyers ask for a price change, money held back in escrow, a cure before closing or different terms, or they end the deal. After Yahoo disclosed data breaches while its sale to Verizon was pending, the two companies amended the deal in February 2017: Verizon cut $350 million from the price, and Yahoo took on half of certain breach liabilities (joint news release filed with the Securities and Exchange Commission).
Sorting a finding by what it changes
A finding can lower the value of the deal, add risk after closing, stretch the timeline or turn up something the buyer will not live with.
| The finding | What it changes | Fixes that fit |
|---|---|---|
| Something is worth less than the buyer was told | The value of what is being bought | A price change |
| Something might go wrong after closing | The risk the buyer carries | Money held back in escrow, a stronger promise from the seller in the contract, or a cure before closing |
| Something will take longer | The timeline | An extension of the dates, written into the contract and the deadline register |
| Something the buyer cannot live with | Whether the deal happens | Ending the deal inside the contract's terms |
A finding the buyer decides to absorb is still raised with the seller, and it goes on the buyer's list of what was asked and what was given. Putting a dollar figure on a finding is valuation work, outside this site.
What the contract still allows
Before any proposal goes out, the buyer's attorney reads three parts of the contract: the diligence period, the seller's representations and warranties, and the escrow and indemnity terms.
While the diligence period is open and the contract allows termination inside it, the buyer can still walk away. The date sits in the deadline register, and a period about to end needs a written extension before a longer conversation starts.
The seller's representations and warranties are the statements of fact the seller makes in the purchase agreement. The Legal Information Institute lists them, along with the indemnification rules, among the usual sections of an asset purchase agreement.
Escrow and indemnity deal with a risk without moving the price. In an acquisition, escrow holds some of the price with a neutral agent after closing, released only when the conditions in the escrow agreement are met, and it secures the seller's representations and warranties. An indemnity clause is the seller's promise to pay for a defined loss.
A breach disclosed before the sale closed
Verizon agreed on July 23, 2016 to buy Yahoo's operating business. According to a Securities and Exchange Commission order announced on April 24, 2018, Yahoo's security team knew within days of a December 2014 intrusion that hackers had taken data on hundreds of millions of user accounts, and the breach was not disclosed to investors until 2016, while the Verizon sale was pending. The commission fined the company, by then renamed Altaba, $35 million; it neither admitted nor denied the findings.
The two companies amended their agreement on February 21, 2017. Verizon took $350 million off the price, which left the deal at about $4.48 billion. Yahoo agreed to carry half of any cash liabilities after closing from third-party lawsuits and government investigations over the breaches, other than the commission's, and it kept shareholder suits and the commission's investigations entirely. In return, the breaches could no longer count toward a material adverse effect or toward certain closing conditions. The deal closed in June 2017.
The walk-away point, written before the call
In their 1981 book Getting to Yes, Roger Fisher and William Ury call a party's fallback, what it does if no deal is reached, its best alternative to a negotiated agreement. For a buyer after a diligence finding, that alternative is usually terminating inside the diligence period or closing on the original terms.
Two numbers go on paper before the call: the fix the buyer asks for, and the least the buyer takes before walking away.
The first call to the seller
A finding that changes the deal goes to the seller by phone or video first, with a written summary the same day. The opening lines name the document and the figure:
- "Before we talk about anything else, I want to walk you through something we found in [the document]."
- "It's on [page and line]. The summary we got in [month] said [figure]. The records show [figure]."
- "I'm not accusing anyone. I want to understand it before I decide what it means for the deal."
- "What am I missing?"
A finding sometimes has an explanation that changes it: a one-time expense, a contract already renewed, a document that was out of date. The buyer asks for the paper behind the explanation and reads it before deciding anything else.
If the finding stands, the buyer says what it changes and makes one proposal, stated once, with the reason:
- "What we found changes the deal I agreed to. I have one way to fix it, and I want to hear yours."
Trading one term at a time
Deepak Malhotra of Harvard Business School calls it labeling a concession when a negotiator says out loud what a give costs, so the other side counts it. "Moving the closing date costs us two weeks of payroll. I can do it." The same article describes making a concession contingent on a defined return, which ties each labeled give to a named get: "I can move closing two weeks if the spare equipment stays in the deal."
A running list kept from signing to closing records each ask and what was given for it, with dates. When a seller says the buyer has taken everything, the list shows both sides what was traded.
A made-up cleaning company
Invented for this guide: the buyer, the company and the numbers. A buyer is under contract to buy a small commercial cleaning company for $900,000. Diligence shows that one of its two largest service contracts ends in four months, and the client has asked other companies for bids. On the call, the seller says they expect to win the new bid.
The buyer proposes holding $60,000 of the price in escrow for six months, in place of a price cut. The seller counters with $40,000 for four months. The buyer agrees and ties the give to a get: "I'll take $40,000 for four months instead of $60,000 for six, if the renewal notice comes to me the day it's signed." Both sides sign an amendment, and the escrow release date goes into the deadline register.
When the seller says no
When the seller will not move, the buyer goes back to the walk-away line written before the call. If the finding is inside that line, the buyer proceeds and tells the seller why. If it is outside, the buyer ends the deal inside the contract's terms, in writing, before the date in the register:
- "We can't close on these terms. If anything changes on your side, I'd like to hear from you."
The new terms in writing
- Send a short written summary of the agreement the same day.
- Put the change into an amendment, signed as the contract's amendment clause requires.
- Update the deadline register with any new dates, owners and conditions, such as an escrow release date.
This guide describes a process. What a particular contract means, and what it allows, is for the attorney on that deal to say.
Sources
- Verizon and Yahoo amend terms of definitive agreement, joint news release, February 21, 2017, filed as Exhibit 99.1 to Yahoo's Form 8-K with the Securities and Exchange Commission. Accessed September 27, 2026.
- Press release 2018-71 on Altaba, formerly Yahoo, and its $35 million penalty, Securities and Exchange Commission, April 24, 2018. Accessed September 27, 2026.
- Asset purchase agreement, Legal Information Institute, Cornell Law School, last reviewed June 2022. Accessed September 27, 2026.
- Escrow, Legal Information Institute, Cornell Law School, last reviewed November 2025. Accessed September 27, 2026.
- Getting to Yes, Roger Fisher and William Ury, first published 1981, Open Library record. Accessed September 27, 2026.
- Four strategies for making concessions, Deepak Malhotra, Harvard Business School Working Knowledge, March 6, 2006. Accessed September 27, 2026.