Managing through corrections in DD?

April 07, 2025
by a searcher from Columbia University in New York, NY, USA
I am working through due diligence on a relatively smaller bolt-on. We recently learned that some of the addbacks were inaccurate, and there's a broker on this one whose stated position is that 'we don't like discussing the addbacks'.
I like the company, and would prefer to close than pass. I wonder if any here have stories or guidance on approaching a repricing without it looking like a retrade.
from University of Pennsylvania in Seattle, WA, USA
If you do delay the tough conversation, I think that can be helpful to get a deal across the finish line when you have momentum but does expose you to increased dead deal cost.
Knowing that it is a bolt on instead of a first acquisition, can you share the current salary you are paying for the role you would need to replace, showing their number is not accurate? You may even be able to "split the difference" to get something from the seller and put it in a more comfortable range for yourself.
Some questions I would be asking myself:
-What are the overstatement affects on both EBITDA and value?
-Where is my current offer in the range of reasonable valuations? Is this a 3X deal or a 6X deal?
-Is the difference in value worth walking away over?
-How competitive has the selling process been. Was it an open process with multiple offers or am I the only person they are talking to?
from Temple University in Philadelphia, PA, USA
That said, you need to bring them up sooner than later. It may be helpful to illustrate which particular add backs you aren't comfortable with, why you believe they should not be added back, and ask them to prove otherwise. If they aren't willing to discuss them, it's really all about your gut feel. Are they really looking for that extra $150k (maybe) or is there something else they aren't telling you?