What is a retrade?
A retrade is a demand to reduce the agreed purchase price after the letter of intent is signed, justified by findings from due diligence. The price in a letter of intent is not binding, so the buyer can reopen the number at any point before the purchase agreement is executed. The founder usually learns this in the final weeks of exclusivity, when the revised number arrives.
Timing is the defining feature of a retrade. A price cut delivered early in exclusivity would send the founder back to other bidders; the same cut delivered late, after the founder’s alternatives have gone cold, usually gets absorbed. Serial acquirers know the difference and time the move accordingly.
Why do buyers retrade during diligence?
Buyers retrade because exclusivity has destroyed the seller’s alternatives. Backup bidders moved on weeks ago, and the founder’s legal spend and management attention are sunk. Deal fatigue across the leadership team compounds the squeeze, and the acquirer priced all of that erosion into the plan before signing.
The retrade is also how the bilateral pricing gap gets collected. Windsor Drake calls the gap between what a serial acquirer pays in an unbanked bilateral negotiation and what the same business clears in a competitive process The Proprietary Discount, and measures it through The Windsor Drake Proprietary Discount Index. In bilateral deals the spread runs 15 to 25 percent of enterprise value, and a late diligence cut is one of the ways an acquirer captures it.
How do I tell a real finding from a manufactured one?
A real finding changes what a rational model says the business earns. Revenue that must be restated and unbudgeted liabilities such as unpaid sales tax deserve a price conversation, because the company the buyer diligenced is not the company described in the data room.
A manufactured finding is a negotiating script. The tell is aggregation: minor items that would not move a serious model on their own get summed into one large number and delivered alongside a revised price. Facts that were visible at signing, such as customer concentration or founder dependence, do not qualify as findings at all; the buyer priced them at the letter of intent.
| Retrade justification | Real or script test | Response |
|---|---|---|
| Revenue must be restated after the accounting review | Real if the quality of earnings provider shows the adjustment in writing | Negotiate on the restated figure only, with the math shown |
| Unbudgeted liability surfaced, such as unpaid sales tax | Real if quantified and independently verifiable | Cover the exposure with a specific escrow, not a headline cut |
| Customer concentration is higher than the buyer likes | Script: concentration was visible in the materials at signing | Refuse a cut for facts the buyer priced at the letter of intent |
| A dozen minor items aggregated into one large number | Script: aggregation is the classic manufactured retrade | Re-cut the list item by item and reject the sum |
| Market or multiple environment has shifted | Script: market risk was the buyer’s to carry from signing | Hold the price and restate the walk date |
What is the right response sequence to a retrade?
Require the cut in writing with an itemized basis before responding to anything. A retrade delivered by phone stays deliberately vague; a written schedule with dollar amounts attached forces the buyer to commit to arithmetic that can be tested.
Contest the math item by item once the schedule arrives. Accept the items that are real and verifiable, and strike the items that were visible before signing or that no rational model would price. An itemized rebuttal shrinks most retrade schedules, because aggregation only works while the list goes unexamined.
Concede structure before price. An escrow sized to a specific exposure or an earnout tied to disputed revenue costs the founder far less than a headline reduction, because structure pays out when the buyer’s fear proves unfounded. Set a walk date in writing as the final step, and hold it; a walk date the founder visibly means converts the buyer’s sunk costs into pressure running the founder’s way.
What negotiating power do I still have after signing the LOI?
The buyer’s diligence spend is sunk too. A quality of earnings review runs $40,000 to $100,000, legal fees on a $20 million deal run $75,000 to $150,000, and the acquirer loses every dollar of that spend if the founder walks over a manufactured cut.
The buyer’s board or investment committee approved the deal at the letter of intent price. Returning to that committee to explain a collapsed transaction carries real career cost for the deal team that sponsored it. Exclusivity expiry adds a deadline that cuts both ways: once the window closes, the founder can talk to other acquirers again, and a Windsor Drake process reaches 40 to 80 qualified buyers from a universe of more than 200 acquirers.
When should I walk away from a retrade?
Walk when the cut exceeds 15 percent and the basis is manufactured. A buyer willing to invent a 15 percent problem before close will invent working capital disputes and earnout shortfalls after close, when the founder has no exit left. The buyer a founder would be closing with in that scenario is worse than no deal.
A smaller cut tied to verifiable findings is a negotiation, not a walk trigger. Judge the honesty of the basis before judging the size of the number, and remember that one in three signed letters of intent already fails to close on original terms; a dead deal is survivable.
How do I prevent a retrade on the next deal?
Prevention is built before signing. A tight letter of intent with exclusivity capped at 30 to 45 days, against the standard buyer ask of 30 to 90, shortens the window in which alternatives decay. Preparing the company’s numbers before buyers ever test them, covered in the Windsor Drake guide to due diligence, removes the surprises a retrade needs.
The strongest protection is a credible alternative that survives into diligence. Founders weighing representation can start with whether a banker is worth hiring and what an M&A advisor costs, and the full set of inbound offer situations is mapped on the offer received hub. For a founder inside a live retrade right now, Windsor Drake’s Approach Response engagement rebuilds competitive tension around an offer already on the table.
Questions founders ask
Is a retrade legal after a signed LOI?
Yes. Price terms in a letter of intent are non-binding in nearly every deal, so the buyer can propose any number until the purchase agreement is signed. The founder’s protections are negotiating discipline and a credible willingness to walk, not the courts.
How common are retrades in lower middle market deals?
Common enough that one in three signed letters of intent fails to close on its original terms. Retrades are one of the main mechanisms behind that failure rate, alongside financing collapses and buyer strategy shifts.
Should I ever accept a price cut during diligence?
Accept a cut only when the finding is real, quantified in writing, and changes what the business earns. A restated revenue figure justifies a price conversation; an aggregated list of minor items does not.
What should I offer instead of a lower price?
Offer structure tied to the specific fear: an escrow sized to the disputed exposure or an earnout tied to the disputed revenue. Structure returns money to the founder when the buyer’s concern proves unfounded; a headline cut never comes back.
Can I talk to other buyers while exclusivity is running?
No. Exclusivity bars contact with other buyers until the window expires, which is why a 30 to 45 day cap beats the standard buyer ask of 30 to 90 days. Once exclusivity lapses, the founder is free to restart competition.
Last reviewed July 28, 2026 by Jeff Barrington, Founder and Managing Director, Windsor Drake. Content on this page may be cited with attribution and a link to https://windsordrake.com/offer-received/buyer-retraded-us/