Purchase price renegotiation is one of the hardest conversations in a transaction, because it arrives after both sides have committed time, money and internal credibility. A target that misses its numbers between the initial offer and signing, or between signing and closing, forces the buyer to decide whether the shortfall is temporary noise or a permanent reduction in earnings power.
The answer determines the remedy. A timing difference or a one-off cost is not a reason to reprice; a lost customer, an expired licence or a structural margin decline is. Approaching the purchase price discussion with a quantified analysis, rather than with a revised offer, is what keeps a deal alive and preserves the relationship needed to complete it.
Repricing starts with evidence, not with a revised offer. Photo: Pexels.
A target company may underperform between the initial offer and signing, or between signing and closing. When revenue, EBITDA, customer retention or cash generation falls below the deal assumptions, the buyer must decide whether the shortfall justifies a purchase price revision and how to negotiate it without creating an avoidable dispute.
Identify the relevant performance baseline
The baseline is whatever the purchase price was actually built on: the management accounts, budget or maintainable earnings figure used to derive the multiple, together with the adjustments already agreed for non-recurring items. Recording that basis in the term sheet is what makes a later conversation possible, because both sides can then compare like with like instead of arguing about which set of numbers the purchase price was supposed to reflect.
The first question is what the parties actually agreed to measure. A forecast in a management presentation may not carry the same contractual weight as a warranty, covenant, completion-account rule or closing condition. The term sheet and acquisition agreement should be reviewed before either side treats a missed target as an automatic repricing event.
The buyer should compare actual results with the valuation model, approved budget and historical seasonality. One weak month may be less significant than a sustained decline in orders, margins or recurring revenue.
Determine why performance deteriorated
A shortfall can result from market conditions, loss of a key customer, delayed contracts, unusual expenses, seller decisions, buyer-related disruption or inaccurate information. Cause matters because it affects both valuation and responsibility. The analysis should separate temporary timing effects from permanent damage to maintainable earnings.
The parties should reconcile accounting policies and remove one-off items consistently. If the original offer used adjusted EBITDA, the revised analysis should not introduce a different methodology merely to produce a lower number.
Quantify the impact on the purchase price
A buyer should prepare a clear bridge from the original assumptions to revised value. If maintainable EBITDA has declined, the agreed valuation multiple may be applied to the verified reduction. If the issue mainly affects closing cash or working capital, a completion-accounts adjustment may be more suitable than changing enterprise value.
Forecast uncertainty can be addressed through a range rather than a single aggressive estimate. The parties can then negotiate a fixed reduction, deferred consideration or a contingent mechanism.
Consider alternatives to a headline price cut
An earn-out can allocate risk where the seller believes performance will recover. Deferred consideration may be paid if specified customers renew or projects reach agreed milestones. An escrow or retention can protect the buyer against a defined downside without permanently reducing value at signing.
Where the shortfall arises from a specific event, a seller cure, operational covenant or targeted indemnity may be more proportionate. These tools should be coordinated with the methods described in revising an acquisition offer after due diligence.
A reduction in the headline figure is the bluntest option and often the hardest for a seller to accept, because it resets the reference point for its own stakeholders. Alternatives that deliver the same economics include deferring part of the purchase price against defined milestones, an earn-out tied to the recovery of the lost revenue, a larger escrow or retention released on performance, a specific indemnity for the identified cause, or a vendor loan that shares the risk of the recovery. Each keeps the headline intact while moving value to where the risk actually sits.
Check signing and closing protections
Read the contract before making a demand. A completion accounts mechanism will already adjust the purchase price for the cash, debt and working capital position on the day, and may capture most of the shortfall automatically. A locked-box structure will not, but a leakage claim or a breach of the interim covenants may. Where the agreement gives no route at all, the buyer has no right to reduce the purchase price and any refusal to complete is a repudiation, so the conversation has to be conducted as a request rather than as an entitlement.
If the acquisition agreement is already signed, the buyer’s rights depend on its wording. A material adverse change clause may apply only to severe and sustained events and often contains market-wide or industry exceptions. Ordinary-course covenants may restrict seller actions but do not guarantee a particular level of performance.
Closing conditions, warranties and termination rights should not be stretched beyond their intended scope. A buyer that lacks a contractual right to reprice may still negotiate commercially, but it should avoid presenting a preference as an entitlement.
Interim accounts must be reliable enough to rely on. Photo: Pexels.
Use reliable interim information
Repricing on unreliable figures is worse than not repricing at all. Before the purchase price is reopened, confirm that the interim accounts have been prepared on the same policies as the audited statements, that cut-off has been applied consistently, and that provisions for bad debt, inventory and accrued employee entitlements have actually been made. Where the target’s reporting is thin, a short agreed-upon-procedures review by an independent accountant is faster and more persuasive than a further round of correspondence.
Renegotiation should be based on current management accounts, sales pipelines, customer data, cash forecasts and explanations from responsible managers. The buyer may request weekly reporting or access to supporting documents. Information rights must respect confidentiality and competition-law boundaries before control transfers.
Manage deposits, exclusivity and timetable risk
Deposits and exclusivity change the balance of a purchase price discussion. A buyer holding exclusivity has time but is also exposed to a forfeited deposit if it walks; a seller running a competitive process can simply return to the underbidder. Agree a short written extension covering the specific issue, confirm in writing what happens to any deposit if no revised purchase price is agreed, and keep the regulatory timetable moving in parallel so that the delay does not create a second problem.
A price dispute may interact with exclusivity, deposits and break fees. The parties should review whether the buyer may withdraw, whether a deposit is refundable and whether a long-stop date needs extension. The treatment should be consistent with the agreed framework for deposits and break fees.
Keeping a short decision timetable can prevent operational uncertainty. Escalation to senior deal principals is often more effective than prolonged exchanges between advisers.
Document the revised bargain
Any agreed change should be reflected throughout the transaction documents. The purchase price clause, completion accounts, earn-out provisions, warranties, disclosure letter, financing arrangements and tax allocation may all require amendment. Side letters that conflict with the acquisition agreement should be avoided.
The amendment should also confirm whether the revised economics fully settle claims relating to the shortfall or preserve specified rights for inaccurate information or later breaches.
Nothing agreed in a repricing discussion is binding until it is in the transaction documents. The amended purchase price, any adjustment mechanism, the accounting policies used to measure it, the treatment of any deposit already paid, and the revised long-stop date should all be recorded in a signed amendment or in the executed agreement itself. Where the transaction has already been notified or filed in Vietnam, check whether a change to the purchase price requires the filing to be updated before completion.
Purchase price renegotiation checklist
- Confirm the contractual and valuation baseline.
- Verify the cause, duration and materiality of the shortfall.
- Use consistent accounting and valuation methods.
- Compare a price cut with deferred or contingent consideration.
- Review warranties, covenants, closing conditions and termination rights.
- Coordinate deposits, exclusivity and the long-stop date.
- Amend every affected transaction document consistently.
Conclusion
Successful repricing after a performance shortfall depends on evidence, proportionality and a credible path to closing. Buyers should connect verified deterioration to the valuation assumptions, while sellers should distinguish genuine economic change from opportunistic retrading. A transparent methodology and well-drafted amendment can preserve the deal while reallocating the new risk.
Frequently asked questions about purchase price
When is a buyer entitled to renegotiate the purchase price?
Before signing, at any time, because there is no binding commitment; a term sheet is normally expressed to be non-binding except for exclusivity, confidentiality and costs. After signing the position is different: the buyer can only reopen the purchase price if the agreement gives it a right to do so, through a completion accounts adjustment, a leakage claim, a specific indemnity, or a material adverse change condition. Otherwise it must complete or face a claim.
How should the shortfall be quantified?
Separate the recurring from the one-off. Rebuild the maintainable earnings figure, strip out non-recurring costs and timing differences, then apply the agreed multiple to the sustainable reduction rather than to the reported number. A shortfall caused by a delayed shipment recognised in the following month has no effect on value; the loss of a customer representing a fifth of revenue changes the purchase price by a multiple of the lost contribution.
What if the shortfall arises between signing and closing?
Look first at the contract. A material adverse change condition may allow the buyer to refuse to complete, but the threshold is high and it is a walk-away right rather than a repricing tool. A completion accounts mechanism will capture the effect automatically through cash, debt and working capital. Interim covenants may have been breached, giving an indemnity claim. Using those contractual routes is safer than an ad hoc demand to reduce the purchase price, which risks a wrongful repudiation.
Can the buyer recover its deposit if the parties cannot agree?
Only if the documents say so. Deposits, break fees and escrowed amounts must be dealt with expressly, including who bears them if the transaction fails for reasons outside either party’s control. Under Vietnamese law a deposit given to secure the conclusion of a contract can be forfeited or doubled depending on which party defaults, so the wording and the characterisation of the payment matter and should be settled before the money moves.
How do you renegotiate without losing the deal?
Present the analysis before the number. Share the workings, agree the factual position with the seller’s finance team, and offer two or three structures that reach the same economics, one of which preserves the headline purchase price. Keep exclusivity and the timetable under active control, and be explicit about which points are genuinely deal-critical, so the seller can see the difference between a negotiating position and a condition of proceeding.
Next step
Before reopening the number, rebuild the maintainable earnings analysis and identify which contractual route, if any, already gives you the adjustment. Confirm the corporate approvals and registration steps that will be affected by any change under the Law on Enterprises, since a revised purchase price often means new resolutions and, sometimes, an updated filing.
IVLF Lawyer advises buyers and sellers on repricing, earn-outs, escrow structures and amendment documents on Vietnamese transactions. An experienced Vietnam M&A lawyer will identify the contractual route to the adjustment before anyone reopens the negotiation. See our legal services or contact IVLF Lawyer.
Related reading: Material adverse change clauses in Vietnam acquisition agreements, Conduct of business between signing and closing, and Essential clauses in a Vietnam share purchase agreement.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
