We all want deals to close seamlessly when selling a business. But what events can cause a deal to break down?

Unfortunately, there are factors that will unravel a deal that are just out of your control. It happens more often than you think and it happens to the best of us. We’re currently in a period of economic uncertainty that can easily break a deal without any warning. This scenario can make emotions run high for both the buyer and/or seller. There are always solutions, however, it’s best not to end up in this situation in the first place. Here are the top reasons why deals don’t close.

Financial Performance

As a seller, you’ll meet with a buyer who received preliminary due diligence and the Confidential Information Memorandum (CIM), providing the history of your business, sales trends, ownership, customers, growth, etc. This material is a key factor in determining the price of the buyer’s bid on your company, which is solely based on their conclusion of your overall financials. For instance, perhaps your profits decreased from two million dollars to one million dollars. Chances are, the buyer will come back to you and ask for a price adjustment, which might be something you, as the business owner, can’t afford to commit to. Without an agreement to a price, both you and the buyer will end up walking away from the deal. You can avoid this scenario by ensuring that your company has excellent financial performance before deciding to sell it. This can and will save you time and energy.


Aside from due diligence and the CIM for your company, it’s typical for buyers to look at a handful of trends. Your company might have a strong performance with your numbers in good order, however, the potential buyer is still looking at components such as your product mix, pipeline, and the stability of your backlog. If you generally run a backlog of four to five million dollars which then slips to three million dollars, it’ll absolutely raise concern in the buyer’s mind. An interested candidate will change their mind quickly about buying your company if your numbers aren’t historically consistent. With that, either the buyer will walk away, or you’re left with no choice but to break the deal. If your company’s trends are slipping, it’s a good indicator that it’s not time to sell your business. You don’t want to jump into a deal that you don’t need to do right now.

Key Performance Indicators (KPIs)

A KPI is an additional type of performance measurement that evaluates the success of your business. An interested buyer will look at a handful of KPIs to further investigate whether your company is worth investing in. Two examples are the price per unit (SKU) and the number of units a company has sold. Clear trend changes among these indicators will raise concern in the buyer’s mind, making it your responsibility to resolve any changes that are causing your company’s performance to be inconsistent with the buyer’s expectations. Lack of effort in doing so will lead to a high possibility of a deal being called off.

Working Capital

Your company’s ability to turn assets into cash is known as working capital – the money available to run your business day-to-day. Working capital begins from the time that you invest money in a product or service and eventually comes back to you in cash down the road. A potential buyer for your business is going to look at your working capital trends and determine whether your business is running consistently with historic levels. Although bumps in the road are normal for a business, such as a supply chain issue, they can become a topic of concern that must be addressed or negotiated now that the process of selling has begun. Essentially, your company’s ability to generate cash is a noticeable reflection of you as a business owner.

Seller Remorse

Sometimes, after giving a deal so much thought, time, and effort, you may decide to take a step back and reevaluate the decision to sell. All of a sudden you might not feel ready to commit to the life that comes after the sale. Seller remorse can also enter the picture when there’s uncertainty about you and your employees’ futures under new ownership of the business. Recurring questions that signal you’re feeling seller’s remorse are “Is this the right number for my business?” Or, “Is this the right deal for my people?.”  If you’re having thoughts like these, it may be that it’s not the right time to pass your company’s torch to someone else, or that you need to prioritize your post-sale plan so that you don’t feel any regret.

Whether it’s your company’s financial performance, trends, KPIs, working capital or seller remorse, numerous factors can lead to a deal breaking down. However, a broken deal is not the end of the world, even though it may feel like it. There is always an opportunity to sell your company when you’re more prepared and ready for action!

Osage Advisors provides a lot of guidance in the M&A market here on our blog and on our YouTube channel and Podcast.