The Top Four Reasons Why Deals Fall Apart

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 735 words

Four problems come up again and again in failed business sales: a buyer who cannot get financing, a seller whose financial records are not ready, a surprise late in the process, and legal, administrative or environmental issues nobody dealt with before going to market. Each is largely preventable, and the prevention happens months before a buyer appears.

Some deals fail for reasons nobody could have foreseen. These four are different: they are the reasons experienced advisors expect, and plan around, from the first meeting.

Reason 1: The buyer's financing does not come through

A buyer can be enthusiastic, sign a letter of intent and spend weeks in due diligence, and still be unable to close because the lender says no or asks for more equity than the buyer has. The fix is to test the money before it matters.

Ask every buyer to complete a financial profile before receiving confidential information. Ask how the purchase will be funded, which lender is involved and whether that lender has seen the company's numbers. If a buyer cannot tell you who its lender is, treat its letter of intent as provisional. Where a buyer depends on bank debt, learn the lender's likely conditions early, including any role it expects a seller note to play. Our answer on evaluating buyer financing before accepting an offer covers the questions in detail.

Reason 2: The seller's financial records are not ready

No serious buyer will commit millions to a company it cannot see clearly. Tax returns that do not match internal statements, books that are months behind, personal expenses mixed with business costs and one-time items with no explanation all slow the process and drain confidence. When numbers arrive late or change during due diligence, buyers assume there is more to find, and they price that assumption into their offer. Fixing records after a buyer arrives is slow and visible; fixing them beforehand is neither.

Ready looks like this.

• Three years of financial statements that reconcile to the tax returns.
• Monthly statements for the current year, closed promptly.
• A recast showing adjusted EBITDA, with each adjustment documented.
• Receivables, payables and inventory reports that tie to the balance sheet.
• A clear record of owner compensation and related-party transactions.

Reason 3: A surprise arrives late

Some surprises cannot be prevented: a key employee resigns, a large customer changes suppliers, the economy turns. Many others are simply facts that surfaced late, such as a pending claim, a tax notice or a contract that cannot be assigned. The later a surprise arrives, the more damage it does, because the buyer has invested time and money, and its lawyers are reading everything for risk.

Two habits help. Disclose known issues early, with context, instead of hoping they will not come up. And run your own review before going to market, the way a buyer's team would. Emotions matter too: a problem that would be a routine negotiating point in week two can feel like a betrayal in month five, when both sides are tired. Having someone between the parties keeps a setback from turning into a walkout.

Reason 4: Problems nobody dealt with before the sale

Serious buyers bring accountants, lawyers and sometimes environmental and operations specialists, and they look at everything. Administrative loose ends, such as missing corporate records, expired licenses or unclear ownership of company assets, raise questions. Legal matters, from how workers are classified to open disputes, raise more. For companies with a facility, environmental issues can stop a lender entirely.

Fixing these takes time, sometimes many months, which is why preparation should start long before a sale. The cheapest time to settle a dispute, renew a license or document who owns a trademark is before anyone is watching. A simple test: if a buyer's lawyer asked tomorrow for every license, permit, lawsuit, contract and title document, how long would it take you to produce them?

How MDR & Associates heads these off

We recast your financials before going to market, screen every buyer for the ability to fund the purchase before they see details, and raise the issues a buyer's team will find while there is still time to address them. Owners who want to begin that work 12 to 24 months ahead use our pre-exit consulting. Our guide on preparing your business for sale is a useful place to begin, and the free valuation snapshot shows where your company stands today.

Where this fitsHow a business sale works, step by step →

Questions owners ask next

How far ahead should I start preparing to avoid these problems?

A year or more is ideal, and two years gives room to fix larger issues such as customer concentration or a thin management team. Even a few months helps: bringing the books current, reconciling statements to tax returns and gathering key contracts removes the most common causes of delay.

Should I get a quality of earnings report before selling?

For larger or more complex companies, a sell-side quality of earnings review by an accounting firm can surface issues before a buyer does and speed up due diligence. For others, a careful recast with documented adjustments may be enough. Ask your CPA and your advisor what buyers of a company like yours will expect.