Big Story

The Unspoken Rule Buyers Try Not to Break

Key Takeaways

• A retrade is a buyer asking to cut the price or change terms after the LOI is signed, and the unwritten rule among credible buyers is to avoid a large one, because a deal runs on goodwill.

• Most retrades are not greed. They are the predictable result of an LOI that left gaps around working capital, add-backs, inventory, customer concentration, or third-party consents.

• The seller's leverage is highest before signing, because terms rarely improve after the LOI and a business that goes back to market after a blown deal is treated as tainted goods.

• The defenses are a tightly defined LOI, a short exclusivity window, a sell-side quality-of-earnings analysis conducted before going to market, and accurate disclosure.

A retrade is the moment a buyer comes back after the LOI and asks to lower the price or move the terms in their favor. A small, evidence-backed adjustment is a normal part of diligence. The thing credible buyers try hard not to do is take a chainsaw to the number late in the process, because they often work alongside the seller after the close, and a deal runs on goodwill that a large retrade burns to the ground. Once goodwill turns into resentment, the two sides start fighting over minor points, and those deals rarely close.

A retrade usually is not a buyer being greedy. It is the predictable outcome of ambiguity. A buyer commits emotionally to a target before the numbers are fully verified, and then diligence sets in. The seller's discretionary earnings do not reconcile to the tax returns. The add-backs are based on opinion rather than fact. The lease cannot be assigned without landlord consent. A key customer can cancel on thirty days' notice, or a lien surfaces that someone has to pay off at closing. None of that was defined in the LOI, so the price moves to absorb it.

This is why the seller's leverage is highest before anything is signed. Terms rarely improve for a seller after the LOI, and a deal that collapses carries a penalty. The business has been off the market for months and conversations with other buyers have cooled. A company that re-enters the market looks like tainted goods, inviting a concession at best. 

The protection is built into the LOI itself. Define the economic unit being bought and set objective adjustment rules. Keep the exclusivity window short, commonly one to three months, and include language that ends exclusivity if the buyer attempts to retrade. The rest is communication and preparation. Accurate early disclosure lets diligence confirm the story, and a sell-side quality-of-earnings run before going to market surfaces weak spots before a buyer does. 

When an adjustment is warranted, the buyer who raises it directly, points to hard evidence that something has changed since the LOI, and softens the blow usually keeps the deal alive. The one who nibbles without a basis loses the goodwill and, more often than not, the deal. For both sides, the lesson is the same. The retrade is as much a test of communication as a negotiation over price.

Governance Feed

1. Private equity buyers are using due diligence to verify whether reported earnings, customer relationships, contracts, management depth, and infrastructure can support the price proposed in the LOI. The review typically includes a Quality of Earnings analysis, working-capital calculations, customer concentration and churn, change-of-control clauses, key-person dependency, and deferred spending on equipment or technology. Aggressive add-backs, recurring costs described as one-time expenses, unsupported growth assumptions, and underinvestment before a sale can all lead to price adjustments, stronger legal protections, or a decision to walk away.

2. A single supplier or customer dependency can sink a deal at the worst moment, as one distribution owner found when tariffs hit mid-process, and the buyer walked away due to supply chain concentration. The restart showed that the risk is partly a positioning problem, since a buyer reads a documented diversification plan and stable long-term supplier terms very differently from an unaddressed dependency. A seller who knows they carry a concentration is better off fixing and framing it before going to market than explaining it under pressure in diligence.

3. Add-on acquisitions now make up the majority of sponsor-backed M&A, often more than three-quarters of deal activity, as firms use buy-and-build to lower blended purchase multiples and grow earnings, while exits remain slow and prices remain high. For a seller, the read is that much of today's buyer demand comes from platforms hunting bolt-ons in fragmented sectors, so a clean business that fits an active consolidation thesis can draw competitive interest even in a selective market.

Thesis Principle

In the upper-middle market, a deal attracts both financial and strategic buyers, resulting in a two-tiered valuation. Financial buyers cap their bids at roughly 8 to 12x EBITDA via LBO math, while a strategic buyer that can underwrite synergies often pays 12 to 15x EBITDA or more. A banker-led two-stage auction and public comps are what push financial buyers up toward that strategic ceiling. Buyers also ask management to roll 10%-25% of equity, and a seller willing to roll more can sometimes lift the headline price.

Resources & Events

📅 SBA Lender Leadership Summit (Park City, UT - July 14-16, 2026)

The SBA Lender Leadership Summit is a limited-attendance event for senior leaders from NAGGL member banks, non-bank lenders, and credit unions that originate and fund SBA 7(a) loans. The program centers on interactive discussions and debates about the future of SBA lending, giving executives an opportunity to examine policy, market, and operational issues with experienced 7(a) practitioners while building relationships with peers across the lending community. Attendance is capped at two participants per eligible institution, with sustaining organizations permitted one additional attendee. Details →

📅 Main Street Summit 2026 (Columbia, MO - September 15-17, 2026)

Main Street Summit brings together more than 1,200 owners, operators, executives, acquirers, and investors involved in small- and mid-sized businesses, particularly companies generating between $1 million and $50 million in annual revenue. The three-day program combines main-stage conversations, tactical workshops, field trips, curated meals, and networking across downtown Columbia, with sessions focused on scaling companies, strengthening operations and leadership, adopting new technologies, acquiring businesses, raising or deploying capital, and preparing for an eventual exit. Details →

📊 Report Spotlight: 2026 Midyear Private Credit Outlook (Lord Abbett)

Lord Abbett's 2026 midyear private credit outlook describes a debt market that has reset toward lenders over the past six months, with new loans arriving at less leverage, more covenants, fewer payment-in-kind requests, and tighter documentation. That means a buyer financing an acquisition in 2026 has to clear a higher bar to reach the same capital, which pushes more of the stack toward equity and seller paper. Spreads have widened across the middle market, and the firm expects the second half of 2026 to be defined by dispersion among managers rather than one uniform trend. The core middle market is where lenders have the most control, because those borrowers have no public-market alternative to push back on spreads or structures. Read →

For the Commute

Stories You Don't See in the CIM (M&A Science)

Eight deal professionals trade the moments that never make it into a CIM. A birthday cake in a management presentation that confirmed the culture fit and shaped a bid. A buyer who died before close and forced a nine-month restart from scratch. Eight years of customer revenue data sitting on a 1980s IBM that management swore did not exist. A target quietly sliding toward Chapter 11 while diligence was underway, where the advisor became the secured creditor to keep the deal alive. The common thread is that surprises like these show up in most processes, and the habit the group points to is to write down each one as a deal closes, so the patterns are easier to spot on the next deal.