We signed a Letter of Intent, but now the buyer is using the due diligence period to re-trade our valuation based on minor operational variances. How do we halt this erosion of our enterprise value before we reach the closing table?

Question

Tyler Smith · Accepted Answer

Re-trading is a common tactic where buyers use the exclusivity period to chip away at the agreed-upon price when you have the least amount of leverage. To prevent this, you must set the rules of engagement in the Letter of Intent before exclusivity begins.

You should include a pre-emptive no-retrade clause that establishes a materiality threshold. This means the buyer cannot renegotiate the purchase price unless they uncover a single financial discrepancy or liability that exceeds a specific dollar amount, typically representing less than two percent of the enterprise value. If they find minor issues below this threshold, they must proceed at the agreed price.

Furthermore, maintain momentum by running a tight, milestone-driven due diligence process. In our EOS work, we treat the path from LOI to close as a series of high-priority Rocks owned by specific members of your leadership team on the Accountability Chart. Keep your weekly Scorecard metrics updated and transparent to prove that the business is performing exactly as represented when the LOI was signed.

If the buyer attempts to renegotiate without a clear, material breach of the agreed parameters, you must be prepared to walk away. Having a strong, systemized operating model gives you the confidence to call their bluff, as they know a well-run business will easily find another suitor.