Private Equity Course Question

First, I apologize if I'm not posting in the appropriate forum. I'm a law student currently working through an assignment for a private equity course. For the assignment, we've been provided with a fictitious, privately held corporation with a very lofty valuation. Our assignment is to negotiate a sale of the company, but we are not at all confident in the astronomical valuation.

My question, for anyone who might be willing to lend some insight, is this: if we were to negotiate for the sale of the company at a price significantly below the last round's valuation, what would be the consequences for the investors who bought in at the much higher valuation? Would the investors be forced to eat the loss on their investment, or is it likely that the investment term sheets would build in some sort of return in the event of a sale?

I realize this must be a dumb question--and I certainly may be off base with my assumptions--but I'm floundering and would appreciate any insight anyone would be willing to lend.