Preston North End have missed out on Manchester United full-back Donald Love who is set to stay in the Premier League and join Sunderland.
The Lilywhites agreed a fee with United on Monday for 21-year-old Love.
But Sunderland, who are managed by former PNE and United boss David Moyes, then made their move with a double bid for Love and Paddy McNair.
Reports say the joint bid is worth £6m to start with – £5m for McNair and £1m for Love.
North End manager Simon Grayson told the Evening Post: “We had a bid accepted by a club on Monday but unfortunately the player is going somewhere else – he is joining a Premier League club.
“We were in the market for the player and had a figure agreed with his club but someone else has taken him off our toes in the division above.
“It shows the level of what we are out there looking at.
“There are players out there who we could bring in now but they wouldn’t improve us in the long term.
“We wanted to wait for the right one and unfortunately that right one is going somewhere else.”
Love played once for United last season, while he also made eight appearances for Wigan in a loan spell.
Grayson has been searching for a right-sided defender since losing Calum Woods for the full season with damaged knee ligaments.
A hamstring injury suffered by Tom Clarke at Reading on the opening day of the season, intensified the search.
The skipper could be back in action for the visit of Fulham to Deepdale on Saturday, although the hunt continues for a right-back.
Said Grayson: “Tom is doing okay and we are hopefully he might be fit for the weekend, although we’ll see where we go with that one.
“We are still looking to make additions to the squad and hopefully we can do that.”
On the action front, Grayson was pleased to see North End squeeze past Hartlepool in the EFL Cup last night.
They left it late though, Eoin Doyle scoring the game’s only goal in the fourth minute of stoppage-time.
Doyle had got the nod to start alongside Joe Garner, with Grayson not wanting to put Jermaine Beckford through Saturday-Tuesday games at this early stage of the season.
Said Grayson: “We played well and created plenty of good chances.
“I told the lads at half-time not to get too impatient when they got in and around the 18-yard box.
“If you keep probing and waiting for opportunities, the opposition might switch off and chances will come.
“Over the course of the game you could see how well we played and we thoroughly deserved to win against a good Hartlepool team – I was very impressed by them.”
The second round draw takes place on Sky Sports tonight after coverage of Luton versus Aston Villa.