Private equity owners Apax and Permira are understood to have asked bidders to raise their first round offers by tomorrow. Initial bids are thought to have been for less than£1.8 billion.
A source close to the sale said: 'The only price that matters is the final price, but the£2 billion price was put out there by shareholders and was slightly unrealistic. It is still a hotly contested process though.'
A lower sale price will come as a blow to Merrill Lynch, which is handling the sale. Its most recent retail deals have been the flotation of Sports Direct and Debenhams, which have both seen their share price plummet.
New Look declined to comment.