Top Reasons Buyers Walk Away

You’ve signed a non-binding Letter of Intent (LOI) with a buyer for your business, and you’re confident the deal will close. But did you know that half of all business sale agreements never make it to closing?

Why? Even with a signed LOI, either party can walk away without consequences.

If a buyer has signed an LOI, they’ve likely reviewed the Confidential Information Memorandum (CIM), which provides in-depth details about your business—organizational charts, customer concentration, and financials. They’ve probably toured the business and met with you. By this point, they should have a good idea if your company fits their criteria.

So, why do deals fall apart even after reaching this stage? Here are the most common reasons buyers walk away:

 

1. Financial Performance Declines

One of the most common deal-breakers is a sudden drop in financial performance after signing the LOI.

Your CIM may show strong historical growth, and the buyer’s offer might align with your three-year cash flow (Adjusted EBITDA). But during due diligence, if revenue, profit margins, or net income decline—even slightly—buyers tend to back out quickly. Investors and lenders don’t want to finance a business showing signs of trouble, and neither does a buyer.

How to prevent it: Once you enter the sale process, keep the business running at peak performance. This is the worst time for numbers to slip—so keep the momentum going.

 

2. Buyer Loses Funding

Buyers finance acquisitions in different ways:

• Their own capital
• Bank loans
• Outside investors/partners

Even when an M&A advisor verifies funding upfront, unexpected issues can arise.

• A bank may reject the deal during final underwriting.
• A key investor could face personal challenges and pull out.

In these cases, the buyer may try to salvage the deal by asking the seller to finance part of the purchase price with a promissory note.

How to prevent it: While you can’t control the buyer’s financial situation, choosing a well-capitalized buyer with multiple funding sources reduces the risk.

 

3. Loss of a Key Employee, Customer, or Vendor

If your business relies too heavily on one employee, customer, or vendor, buyers see it as a red flag.

During due diligence, they want assurance that the business will remain stable post-sale. Some buyers may even request meetings with key employees and customers before closing.

How to prevent it:

• Avoid customer or vendor concentration over 10-15% of revenue.
• Build a strong management team that ensures continuity if someone leaves.
• If a key employee, customer, or vendor does exit before closing, expect the buyer to reconsider the deal.

 

4. Buyer Finds Another Opportunity

Even with a signed LOI, buyers sometimes pursue multiple acquisition opportunities at once. If they find a business that better fits their needs, they may drop your deal and move on.

How to prevent it: While you can’t force a buyer to stay, you can make your business more attractive by keeping financials strong, ensuring a smooth transition plan, and maintaining a well-structured operation.

 

Final Thoughts

Selling a business is rarely a smooth process. Even with an LOI in place, the deal isn’t done until the purchase agreement is signed and the transaction closes.

While you can’t control a buyer losing funding or choosing another deal, you can reduce the chances of them walking away by:

• Maintaining strong financials throughout the sale process
• Diversifying revenue sources
• Having a solid management team in place

The best way to secure a successful sale? Build a resilient, well-structured business that remains attractive all the way to closing.