One common question that comes up in just about every business sale I advise on.
“The buyer wants to reduce the purchase price during due diligence. Is the deal starting to fall apart?”
Usually, the answer is no.
Sometimes due diligence uncovers genuine risks that weren’t obvious when the offer was made. Other times, the buyer is simply trying to strengthen their negotiating position. The important part is understanding which situation you’re dealing with before reacting.
Over the years, I’ve seen both scenarios play out. One mistake sellers often make is assuming every request for a discount means the buyer is acting in bad faith. In most cases, they aren’t.
Key takeaways
- Not every price reduction request is justified.
- Due diligence is designed to test assumptions, not derail transactions.
- The best defence against unnecessary price reductions is preparation.
- Evidence, not opinion, wins commercial negotiations.
Buyers make offers with incomplete information
No buyer has the full picture when they submit an offer. At that stage they’re relying on the Information Memorandum, the financial statements, discussions with the owners and, to a large extent, the story that’s been presented about the business.
Due diligence is where they begin testing whether that story actually stacks up. They’re reviewing contracts, checking customer relationships, analysing financial records and asking themselves one simple question:
“Does this business perform the way I believed it would when I made my offer?”
If new information changes that answer, it’s perfectly reasonable for buyers to reassess the economics of the deal.
Common reasons buyers ask for a price adjustment
- Customer contracts can’t be transferred.
- Earnings require adjustment.
- Legal or compliance issues emerge.
- A major customer relationship proves less secure than expected.
These are genuine commercial issues. Buyers aren’t necessarily looking for an excuse to renegotiate; they’re reassessing expected returns against the risks they’ve now identified.
But let’s be realistic
Not every request for a discount is driven by newly discovered risk. Some buyers submit a strong initial offer knowing they’ll negotiate later.
The strategy is relatively straightforward: secure exclusivity, gain unrestricted access to the business and then look for opportunities to reduce the purchase price.
That’s exactly why buyers engage experienced advisers. Their role is to question assumptions, verify important claims and identify anything that could affect value. I’d expect them to do exactly that, and so should every seller.
Preparation starts long before due diligence
Key principle
Negotiating strength isn’t created during due diligence. It’s created before the data room ever opens.
Every important statement about your business should be capable of being verified.
If you’re claiming strong customer retention, show the retention data. If recurring revenue is a key strength, have the contracts and historical figures ready. If you’ve normalised earnings, document every adjustment properly.
If you can’t prove it, don’t expect a buyer to simply accept it.
The easier it is for buyers to verify information, the less opportunity there is for uncertainty to become a bargaining tool.
Don’t try to hide the difficult issues
This is where many sellers unintentionally weaken their position. They worry that disclosing an issue early will reduce the value of the business.
In my experience, the opposite is usually true. Experienced buyers and their advisers almost always find these issues anyway. If they discover something that appears to have been hidden, trust disappears very quickly, and once trust starts disappearing, value often follows.
I’ve always found it’s better to get in front of the issue yourself. Explain what happened, why it happened, how you’ve managed it and why it won’t materially affect the future of the business.
Being transparent doesn’t weaken your negotiating position. More often than not, it strengthens it.
Do your own due diligence first
One exercise we regularly recommend is surprisingly simple: review your own business as though you were buying it.
- Where are the weak points?
- Which assumptions are we making?
- What would concern us if we were the buyer?
- Can every important claim actually be supported?
I often compare this to preparing for litigation. A good lawyer doesn’t wait for the other side to identify weaknesses; they find them first.
Business owners preparing for a sale should adopt exactly the same mindset.
When buyers ask for a discount
One thing clients sometimes expect me to do is immediately push back. That’s rarely the first step.
The first step is understanding how the buyer reached that position.
- What has actually changed?
- What evidence supports that conclusion?
- Can the additional risk be demonstrated?
- Does it genuinely change the value of the business?
If someone tells me the business is now worth less because they’ve identified additional risk, my response is always the same:
‘Show me.’
Show me where the risk is, how you’ve quantified it and why it changes the economics of the transaction.
Sometimes it does. Sometimes it doesn’t. Commercial negotiations should always be driven by evidence, not assumptions.
A transaction that sticks in my mind
One transaction in particular comes to mind. The buyer engaged an external adviser during due diligence who arrived with a fairly long list of reasons why the purchase price should be reduced.
Rather than becoming defensive, we sat around the table and worked through every point together. Some concerns were legitimate and required further explanation. Others disappeared once everyone stopped relying on assumptions and started looking at the underlying evidence.
By the end of the meeting, the commercial terms were almost exactly where they had started.
‘Good evidence resolves uncertainty far better than emotion ever will.’
Final thoughts
Due diligence exists to test assumptions. Sometimes it uncovers genuine issues that justify a change in price or deal structure. Other times, it simply becomes another stage of commercial negotiation.
The sellers who consistently achieve the best outcomes aren’t always the toughest negotiators. More often, they’re the ones who prepare early, keep good records and support every important claim with evidence.
Practical insight
Buyers rarely discount businesses because they’re looking for an excuse. More often than not, they discount businesses because uncertainty creates risk.
Reduce the uncertainty, and you’ll usually reduce the pressure to renegotiate.
Thinking about selling your business?
Preparing for due diligence before you go to market can make a significant difference to the outcome of your transaction.
If you’re considering selling your business, Expert Business Advisors can help you identify potential issues early, strengthen your negotiating position and prepare your business for a successful sale.
About the author
Daniel is an M&A Adviser at Expert Business Advisors with more than 15 years’ experience advising business owners on business sales, acquisitions and valuations. Having worked across transactions of varying sizes and complexity, he specialises in helping business owners maximise value and successfully navigate the sale process.
