Most business owners think a signed letter of intent means the hard part of an exit is over. However, in our experience, it’s often where the real work begins.
Axial’s 2026 lower middle market outlook surveyed 107 deal participants. Among advisors, 41.4% said they closed half or fewer of their deals with a 2025 target close date. The top two culprits were valuation expectations (28.3%) and diligence findings (24.5%).
We’ve been doing this for 40 years and have closed hundreds of transactions. The reasons why deals die haven’t changed much, and nearly all of them can be avoided. Here are the six we see most.
1. The Financial Statements Don’t Hold Up Under Scrutiny
A buyer prices your business based on the numbers you give them. If those numbers change in diligence, the price will change too, and the buyer could walk away.
Axial’s Dead Deal Report looked at 75 failed transactions. According to Valutico’s analysis, quality of earnings discrepancies alone killed 21.3 of them, and diligence findings in total accounted for 46.6%.
That’s why we keep saying that nothing lowers your valuation more quickly than incomplete or inconsistent financial records. Have a CPA firm audit or review your last five years of statements. It may feel like a sunk cost, but CPA-prepared financials bring in more buyers and shorten due diligence.
Then take it one step further with a quality of earnings (QofE) report. A QofE adjusts for one-time and non-recurring items, tests revenue and profit trends, and benchmarks working capital. What comes out is a clean, defensible picture of what your business really earns. Without one, buyers do their own digging and often find surprises that slow negotiations, cut the price or kill the deal.
A QofE usually costs between $35,000 and $75,000. That seems like a lot of money until you compare it with a price reduction at the eleventh hour.
2. The Owner Checks Out During the Process
Selling a business is a second full-time job on top of the one you already have. Some owners get worn out, or they’re already mentally on the beach, and they stop paying attention to the company.
Buyers are watching your numbers the whole time. One soft quarter between LOI and closing hands them a reason to renegotiate, or to start wondering what else has slipped. Keep running the business like you’re not selling it until the money is in your account. And lean on your advisors to carry the process so you can do that.
3. The Owner Can’t Let Go
You spent decades building this company. Of course it’s emotional.
But owners who haven’t figured out what comes next tend to hold on. They push back on reasonable requests, reopen terms that were already settled, or find reasons to slow things down. Sometimes they don’t even realize they’re doing it. The deal doesn’t blow up in a single dramatic moment. It dies slowly.
Decide what the next chapter looks like before you go to market. Travel, family, a new venture, a board seat, giving back. It doesn’t matter what it is. Owners who know what they’re walking toward make decisions much faster.
4. The Company Depends Too Much on the Owner
Buyers want a business, not a job. If every decision, client and relationship runs through you, they see risk, not opportunity.
As we’ve written before, investors want a company with growth potential and a strong management structure, not one that relies on a single leader. Here’s a simple test. Could you take a month off without checking in? If the answer is no, a buyer will see it too.
Build a management team that can run things without you. Delegate real responsibility, write down your processes, and spread client relationships across the organization. Start at least a couple of years before you plan to sell.
5. Deal Fatigue and an Inexperienced Advisory Team
Every deal hits a rough patch. A surprise comes up in diligence, a negotiation stalls, a lender takes too long. What matters is whether anyone at the table knows how to push through it.
Our Chairman & CEO, Bob Hild, likes to say that time kills all deals, and he’s right. The longer a process drags, the more likely someone loses patience, the market moves or a buyer gets nervous.
Experienced advisors see problems coming, keep the timeline moving and manage the emotions on both sides. Inexperienced ones let small issues grow into deal-breakers, and they often don’t run a competitive process at all. As far as we’re concerned, one buyer means no buyers.
6. Buyers With No Cash
One trend we can’t ignore is the rise of unsponsored buyers, also called unfunded or self-funded searchers. They submit offers and hope to find the money before closing.
This model has exploded. The Stanford Graduate School of Business 2024 Search Fund Study counted a record 94 new search funds in the U.S. and Canada in 2023 alone. Self-funded searchers typically go after businesses in the $5 million to $25 million range, with deals often about 75% debt-financed. That leaves very little cushion if a lender balks or rates move. Axial’s data puts financing constraints behind roughly 10.7% of failed deals.
We’ve seen what this looks like up close:
You can read more in our post on the hidden risks of selling to a search fund buyer. The takeaway is to verify proof of funds early, before you grant exclusivity. Strategic buyers, private equity firms and family offices usually come with committed capital and experienced deal teams.
Keeping Your Deal on Track
Almost every deal killer on this list can be fixed ahead of time. Get your financials CPA-prepared and consider a QofE before you go to market. Build a team that can run the company without you. Know what you’re doing after the sale. Hire an M&A advisor who runs a competitive process. And confirm every buyer’s funding before you sign anything exclusive.
Unless you’re a serial entrepreneur, you’ll only sell a business once. You don’t want to get it wrong. If you’re thinking about a sale in the next few years, contact us and let’s talk about how to get you ready.
About ACT Capital Advisors
ACT Capital Advisors is a premier investment bank representing founder-led and privately held companies across all industries. ACT has a 40-year history of deal-making success, closing hundreds of transactions, and unlocking over $2.5 billion in wealth for its clients. Recognized by Axial as a Top 10 Investment Bank.
