Finding a problem during due diligence does not automatically mean the transaction should end. It does mean the original assumptions need to be revisited. The useful response is to understand the issue, assess its commercial significance and decide whether it can be addressed on acceptable terms. That decision should be informed by the relevant legal, accounting or specialist advice.
Define the finding precisely
Ask the adviser to explain what has been established and what remains uncertain. Is there a quantified exposure, a missing document, an unreliable assumption or an operational weakness? Distinguish a confirmed problem from a request for further information. Decisions become difficult when a finding is described in alarming language but its actual scope is unclear.
Also ask which part of the acquisition case the finding affects. A customer concentration issue may change expected earnings. An operational dependency may affect handover. A regulatory concern may require specialist advice about whether the proposed business activity can continue. These issues should not be compressed into a single general statement that the transaction is risky.
Consider realistic responses
Depending on the finding and the advice received, the parties might discuss further investigation, remediation before completion, a revised price, a different payment structure or another allocation of responsibility. Each option should be assessed on its merits. Ask your lawyer whether proposed protections are effective and your financial adviser whether the adjusted economics still support the acquisition.
Consider a hypothetical business that depends heavily on one customer. A buyer might seek an introduction and better evidence about the relationship before deciding how to proceed. A price reduction alone may not address the concern if losing that customer would undermine the entire business. The response needs to match the actual problem rather than simply reduce the number.
Keep the negotiation credible
Explain the commercial consequence of the finding and the basis for the proposed adjustment. A clear link between evidence and request is more constructive than a broad demand for a discount. Sellers should have an opportunity to clarify or respond to the finding, particularly where the issue may arise from incomplete information or a misunderstanding of operations.
Prioritise material issues. Combining a serious finding with a long list of minor complaints can make the discussion harder to resolve. Identify which matters affect your willingness to proceed, which change the price or structure, and which can be managed through an agreed transition plan. Record your position and keep adviser instructions consistent.
Set a decision point
Avoid an indefinite investigation with no clear outcome. Agree what further information is needed, who will obtain it and when you will reassess. Consider the cost of delay and the opportunity cost of continuing. Money already spent on diligence should inform budgeting, but it should not compel you to complete a transaction that no longer meets your objectives.
If a diligence finding has disrupted your negotiations, Ardian Law can help coordinate the response and work through the commercial options with your advisers. Call 02 8111 7700 with the key finding, current proposal and decision you need to make.