On the heels of an intricate negotiation, conditions change for the worse. Crops fail, the price of oil skyrockets, one side issues an earnings restatement, or the market as a whole is a lot less promising than it was when you negotiated the initial terms. Suddenly your agreement has lost its luster. How should you respond when a deal looks less rosy?

This is the basic question the three sides involved in the leveraged buyout of Home Depot.
Depot’s HD Supply business faced in July 2007. Home Depot decided to sell its underperforming HD Supply and focus on its core business. They accepted a $10.3 billion bid from a consortium of private equity firms, and three banks agreed to support the buyers with a $4billion loan.

But in July the subprime mortgage market imploded and HD Supply looked a lot less attractive with its dependence on the housing market. The buyers threaten to walk away. Then the banks insisted on their turn at the renegotiation table. How did they handle this crisis negotiation?

The three sides were able to renegotiate terms that, while far from perfect, still made the deal worth closing to each of them. Here’s how you can cope with post-negotiation changes:

• Prepare for the worst. During the initial negotiation, analyze whether you could live with the proposed deal terms if organizational, industry, or market conditions changed drastically before or after closing.
• Expect renegotiation. If boom turns to bust, whether in the industry or within one of the companies involved, accept that you may need to renegotiate. Focus on getting what you want most in return for tradeoffs on issues less important to you.
• Develop an exit strategy. Weigh the negative consequences of walking away from a deal, such as financial penalties and reputational damage, against the long-term risks of pressing forward.