What Happens if the Purchase Price Changes After Finance Has Been Discussed?
Updated: Oct 24
A purchase-price change is not only a negotiation change. It can alter the loan amount, buyer contribution, servicing position and lender assumptions behind the earlier finance discussion.
Purchase price changes after finance has been discussed should be reported promptly rather than treated as a minor commercial adjustment.
Stage 4 is where the buyer, finance broker and lawyer need to keep the evolving deal terms aligned.
Purchase price changes after finance: the short answer
A higher price can increase the debt or buyer contribution required.
A lower price can also change the structure, deferred consideration or lender calculations.
The earlier finance view may have been based on a specific purchase price and settlement payment.
The revised price should be communicated before the buyer relies on the old finance assumptions.
Any changed offer or HOA should reflect the current commercial terms.
The required loan amount may change
If the buyer's available contribution stays the same while the price rises, the funding gap may increase. That can change whether the original lender structure still works.
The contribution percentage may change too
Even if the dollar contribution does not move, the buyer's relative contribution to the transaction can change when the purchase price changes. The lender may need to reconsider the overall structure.
Servicing assumptions can move
A larger debt facility means larger repayments unless some other element of the transaction changes. The combined cash flow therefore needs to be considered against the revised debt requirement.
Valuation and price are separate concepts
A negotiated purchase price does not automatically determine the value a lender or valuer may attribute to the acquisition. The lender's assessment may still rely on its own view of the transaction and supporting evidence.
A lower price is not always irrelevant to the finance structure
A reduced price can improve the funding gap, but it may be accompanied by other negotiated changes—such as more cash at settlement, less vendor finance or different inclusions—that still affect the finance position.
Questions to ask when the price changes
What is the new total price?
Has the amount payable at settlement also changed?
Is the buyer contribution changing?
Does deferred consideration or vendor finance change?
Has the finance broker reassessed the updated structure?
Frequently asked questions
Do I need to tell the broker if the price changes only slightly?
Yes, materiality should not be guessed. The broker should know the current commercial terms so they can determine whether the finance view needs updating.
Does a lower purchase price automatically improve approval chances?
Not automatically. The lender may also consider the business, borrower, security and the other deal terms.
Should the offer be updated too?
Any legal document should reflect the agreed commercial terms. The buyer's lawyer should advise on how changes are documented.
Illustrative Stage 4 scenario
A buyer originally discusses finance at a $900,000 price. Negotiations later increase the price to $1 million while the buyer's cash contribution stays unchanged.
The finance gap has changed, so the broker needs the revised terms before the buyer relies on the earlier funding view. This example is illustrative only.
Which adviser covers which issue?
A finance broker can reassess the likely funding impact. A commercial lawyer can update the relevant offer or HOA documents. An accountant or transaction adviser may help reassess the economics of the revised price.
What should you look at next?
Price is not the only deal term that can change after the initial finance review. Vendor finance can materially alter the structure as well.
Conclusion
Once finance has been discussed, a price change should trigger a funding check rather than an assumption that the original structure still works. Stage 4 is about keeping the commercial and finance versions of the deal the same.
Considering an Accounting Practice Acquisition?
Your acquisition finance adviser can help you keep the proposed deal terms, finance pathway and transaction timing aligned before the acquisition moves further.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
