Why M&A Deals Fall Apart: A 2026 Data Report on Deal Killers

Most articles about selling a business stop at the offer. The letter of intent gets signed, everyone shakes hands, and the story ends. The data tells a harder truth. A signed LOI starts a 60 to 120 day exclusivity and diligence period, and a meaningful share of deals die during that window. This report compiles what the most recent published deal data says about why, and what a lower middle market owner can do about it before the LOI is ever on the table.

How Often Deals Actually Die After the LOI

A signed letter of intent has a real failure rate, and most owners underestimate it. A widely cited figure in M&A advisory work is that roughly one third of signed LOIs do not result in a closed deal. The figure is directional rather than a single audited statistic, because no public registry tracks every private LOI, but it is consistent across advisor commentary and it matches what the deal-failure data below describes.

The reason this matters is the exclusivity clause. When you sign an LOI, you almost always agree to stop talking to other buyers for 60 to 120 days while the buyer runs diligence. If the deal then collapses in week 10, you have lost three to four months, your team has been distracted, information about the sale may have leaked, and you are back at the start. Understanding why deals die is how you avoid being in the one-third.

The most useful published breakdown of why LOIs break is the Axial Dead Deal Report, which each year analyzes a sample of unsuccessful transactions. The 2025 edition examined 75 unsuccessful transactions across eight firm types and eight industries. The sections below use that dataset as the spine, cross-referenced with SRS Acquiom deal-terms data and advisory analysis from Dickinson Wright and ACG.

The Six Deal Killers, Ranked by Frequency

The Axial Dead Deal Report’s 2025 breakdown of why executed LOIs failed to close, ordered from most to least common:

Source: Axial, “Dead Deal Report: Unpacking 2025’s Broken LOIs,” based on 75 unsuccessful transactions. Percentages are the share of analyzed failed deals attributed to each cause.

The headline finding. Add the top two rows together. Diligence findings, financial and non-financial combined, accounted for about 46.6% of failed deals. Nearly half of dead deals died because the buyer looked closely and did not like what they found. That is the single most important fact in this report, because diligence findings are the most preventable category. You cannot control a buyer’s lender. You can control what a buyer finds in your books and your contracts.

Deal Killer 1 and 2: Diligence Findings (About 47% of Failures)

The two largest causes of dead deals are both diligence findings, and both are getting worse. The Axial data shows a clear multi-year trend.

Source: Axial Dead Deal Report, 2023 and 2025 editions. Non-QoE diligence findings also recorded 21.5% in the 2024 edition.

The story in that table is a shift in what kills deals. In 2023, when debt was expensive and scarce, financing was a top reason deals fell apart. As capital became more available through 2024 and 2025, financing-driven failures fell by roughly half. They did not disappear, but they stopped being the main event. What replaced them was diligence. With money easier to raise, buyers spent their attention on scrutiny, and the deals that broke increasingly broke because the buyer found something.

What “non-QoE diligence findings” actually means

This is the single largest category at 25.3%, and it is the broadest. It covers everything the buyer’s review turns up that is not a pure earnings restatement:

• Customer concentration that was understated or a key customer relationship that looked weaker on inspection.
• Contracts that do not transfer. A change-of-control clause that lets a major customer or supplier walk on a sale.
• Legal and compliance problems: unresolved litigation, licensing gaps, regulatory exposure, employment issues.
• Operational reality not matching the pitch: deferred maintenance, technician turnover, systems held together by one person.
• Owner-dependency surfacing once the buyer sees how much runs through the founder.

For a home services business specifically, the most common version we see is customer concentration and contract assignability. A buyer who learns that one property-management client is 30% of revenue, or that the maintenance agreements do not survive a change of ownership, has a reason to retrade or to walk.

What “QoE EBITDA discrepancies” actually means

This category, 21.3% of dead deals and roughly double its 2023 share, is the financial one. A quality of earnings review is the buyer’s deep audit of your real, normalized earnings. It strips out one-time items, tests your add-backs, and checks whether revenue that looked recurring actually recurs. The deal dies here when the QoE concludes that real EBITDA is materially below the figure the LOI was priced on.

The mechanism is simple and brutal. If the LOI valued the business at 5x a claimed $2M of EBITDA, that is a $10M deal. If the QoE finds the defensible figure is $1.6M, the same 5x multiple now supports an $8M deal. The buyer asks for the lower price (a retrade), and if the seller will not accept it, the deal is dead. Aggressive or undocumented add-backs are the most common trigger.

Deal Killer 3: The Retrade (14.7% of Failures)

A retrade is when the buyer tries to change price or terms after the LOI is signed. It is the third-largest cause of dead deals at 14.7%, and it is closely related to the diligence categories above, because a retrade is usually what a buyer does with a diligence finding. The finding is the reason; the retrade is the move.

Not every retrade kills the deal. Many deals survive a price adjustment. The deal dies when the gap between the new offer and the seller’s floor is too wide to bridge, or when the seller has lost trust in the buyer and decides the relationship is not worth continuing. The defense against a retrade is preparation: a buyer who finds nothing surprising has nothing to retrade on.

It is worth separating the retrade from the routine post-closing purchase price adjustment, which is a different and more normal process. The SRS Acquiom 2025 Working Capital Purchase Price Adjustment Study, which analyzed 1,250 private-target deals, found that buyers’ proposed working capital calculations were reviewed and accepted in about seven of ten cases, and that even contested claims were resolved in under two months on a median basis. A normal working capital true-up is not a deal killer. A diligence-driven retrade on headline price is.

Deal Killer 4: The Seller Walks (13.3% of Failures)

In 13.3% of failed deals, the seller is the one who ends it. This category is a useful corrective to the assumption that dead deals are always the buyer’s doing. Sometimes the seller gets cold feet, realizes mid-process that they are not emotionally ready to let go, receives a better offer, or decides the buyer is not the right home for the business and the employees.

The lesson here is about readiness rather than mechanics. An owner who has not honestly decided to sell, who has not thought through what life looks like after the close, or who has not aligned with co-owners and family before signing the LOI, is at risk of becoming a statistic in this category. Deciding to sell is a real decision, and it should be made before the LOI, not discovered during diligence.

Deal Killer 5: Financing Falls Through (10.7% of Failures)

Financing constraints caused 10.7% of dead deals in 2025, down sharply from 21.3% in 2023. This is the most macro-driven category. When debt is expensive or lenders are cautious, more deals die because the buyer cannot fund the purchase. As credit conditions eased through 2024 and 2025, this cause fell by roughly half.

A seller cannot control interest rates, but a seller can influence financing risk in two ways. First, the quality of the business affects the buyer’s ability to raise debt against it: clean financials and stable cash flow make a lender’s job easier. Second, the choice of buyer matters. A private equity platform with committed capital, or a strategic acquirer using its balance sheet, carries less financing risk than an individual buyer assembling an SBA loan and outside equity. Knowing how your buyer is funded is part of reading deal risk.

Deal Killer 6: The Business Slips During Diligence (8.0% of Failures)

In 8.0% of failed deals, the business itself declined during the diligence period. Diligence takes 60 to 120 days, and the business has to keep performing the entire time. If revenue softens, a major customer leaves, or results visibly weaken between the LOI and the close, the buyer has a legitimate reason to retrade or walk, because the thing they agreed to buy is no longer the thing in front of them.

This is partly bad luck and partly a management problem. The risk rises when the owner becomes so consumed by the deal that the business drifts. The practical defense is to keep running the company hard through the entire diligence period, and to delegate enough that the deal process does not pull the owner off the floor.

What This Means for a Home Services Owner Considering a Sale

The data points to one clear conclusion: most deal killers are found, not random. Roughly 47% of dead deals died from diligence findings. Another 14.7% died from the retrade those findings produced. Taken together, more than 60% of failed deals trace back to a buyer discovering something during the post-LOI review.

That is good news, because found problems are preventable problems. The owners who close are not lucky. They are prepared. The single highest-value thing a home services owner can do to avoid being in the failed-deal third is to run the diligence on themselves before a buyer ever does:

• Get a sell-side quality of earnings review before going to market. If your real EBITDA is lower than you think, you want to find that out on your own timeline, not in week eight of exclusivity. See our 2026 QoE Provider Comparison for how to choose a firm.
• Fix customer concentration and check contract assignability well in advance. These are the most common non-QoE findings in home services deals.
• Clean the financials a full year out so add-backs are documented and survive a QoE.
• Decide, honestly, that you are selling before you sign anything, and align co-owners and family first.
• Keep the business performing through diligence. Do not let the deal pull you off the floor.

Our guide on how to increase business value before selling covers the operational side of this preparation in depth, and the 2026 Earnout Benchmark Report covers what happens when a buyer wants to bridge a valuation gap with structure instead of walking.

How CT Acquisitions Reduces Deal-Failure Risk

The failure data is also an argument for how a sale process is run. A buyer-paid, off-market process is built to reduce several of the categories above. We work with 76-plus active buyers, search funders, family offices, lower middle market private equity, and strategic consolidators, and we know each buyer’s mandate and funding before an introduction is made. That reduces financing-risk surprises. We introduce one or two pre-mandated buyers rather than running an auction, which reduces leak risk and the chance of a seller-side collapse. And because we have seen what diligence turns up, we can flag the likely findings before the LOI, so they get fixed rather than discovered. The buyers pay us when a deal closes. There is no fee to the seller, no retainer, and no exclusivity.

Limitations of This Analysis

This report compiles published deal-failure data and names every source. A reader weighing these figures should keep the following in mind:

• The central reason-breakdown is from the Axial Dead Deal Report (2025 edition), based on a sample of 75 unsuccessful transactions across eight firm types and eight industries. It is a sample, not a census, and it covers Axial’s deal population, which skews to the lower middle market. The 2023 and 2024 comparison figures are from earlier editions of the same report.
• The figure that roughly one third of signed LOIs do not close is a widely cited industry estimate, not a single audited statistic. No public registry tracks every private LOI. We present it as directional.
• The working capital purchase price adjustment figures are from the SRS Acquiom 2025 Working Capital Purchase Price Adjustment Study (1,250 private-target deals, 2020 through Q3 2024).
• The home-services-specific observations, particularly that customer concentration and contract assignability are the most common non-QoE findings in this sector, are CT Acquisitions observations from our own pipeline, not figures from a published study. They are labeled as such here.
• Deal-failure causes shift with the macro environment. The 2023-to-2025 trend in this report shows exactly that, financing risk falling and diligence risk rising. These figures should be re-checked against the next edition of the underlying studies.

Frequently Asked Questions

What percentage of M&A deals fall apart after the LOI is signed?

A widely cited industry estimate is that roughly one third of signed letters of intent do not result in a closed deal. It is a directional figure rather than a single audited statistic, because no public registry tracks every private LOI, but it is consistent across M&A advisory commentary.

What is the most common reason a deal dies after the LOI?

Diligence findings. Per the Axial Dead Deal Report’s 2025 data, non-QoE diligence findings (25.3%) and quality of earnings EBITDA discrepancies (21.3%) were the two largest causes, together accounting for about 47% of failed deals. In other words, nearly half of dead deals died because the buyer looked closely and did not like what they found.

What is a QoE discrepancy and why does it kill deals?

A quality of earnings review is the buyer’s deep audit of your real, normalized earnings. A QoE discrepancy means the review concluded that defensible EBITDA is materially lower than the figure the LOI was priced on. Because deal value is EBITDA multiplied by a multiple, a lower EBITDA finding lowers the price the buyer will pay. If the seller will not accept the reduced price, the deal dies. Per Axial, QoE discrepancies caused 21.3% of dead deals in 2025, roughly double the 2023 share.

Has financing become a bigger or smaller reason deals fail?

Smaller. The Axial data shows financing constraints fell from 21.3% of dead deals in 2023 to 10.7% in 2025, as credit conditions eased. Over the same period, diligence-driven failures rose. The mix of deal killers shifts with the macro environment.

Can a seller prevent a deal from falling apart?

Largely, yes, because most deal killers are found rather than random. More than 60% of failed deals trace back to something a buyer discovered in diligence or to the retrade that discovery produced. A seller who runs a sell-side quality of earnings review, fixes customer concentration, confirms contract assignability, and cleans the financials before going to market removes the most common reasons deals die.

How is CT Acquisitions different from a sell-side broker or M&A advisor?

CT Acquisitions is a buy-side partner. We work directly with 76-plus active buyers and know each buyer’s mandate and funding before an introduction. The buyers pay us when a deal closes, so there is no fee to the seller, no retainer, and no exclusivity. Because we have seen what diligence turns up across many transactions, we can flag the likely findings before the LOI so they get fixed rather than discovered.

Sources and Further Reading

• Axial, “Dead Deal Report: Unpacking 2025’s Broken LOIs” (75 unsuccessful transactions across eight firm types and eight industries). Primary source for the reason-breakdown and the 2023 to 2025 trend. axial.net
• SRS Acquiom, 2025 Working Capital Purchase Price Adjustment Study (1,250 private-target deals, 2020 through Q3 2024). Source for the working capital adjustment and dispute-resolution figures. srsacquiom.com
• Dickinson Wright, “Why Lower and Middle-Market M&A Deals Fail to Close.” Advisory analysis of post-term-sheet failure warning signs. dickinson-wright.com
• ACG / Middle Market Growth, “Why Middle-Market Deals Fail After the Term Sheet.” middlemarketgrowth.org

Last verified against primary sources: May 2026. The home-services-specific observations in this report are CT Acquisitions observations from our own deal pipeline and are labeled as such in the body and in the Limitations section.

Related Guides

• How to Increase Business Value — the 12 operational levers that fix what diligence looks for.
• 2026 QoE Provider Comparison — how to choose a sell-side quality of earnings firm.
• 2026 Earnout Benchmark Report — what happens when a buyer bridges a valuation gap with structure.

About the author

Christoph Totter is the founder of CT Acquisitions, a buy-side M&A partner headquartered in Sheridan, Wyoming, working with 76+ active buyers across search funds, family offices, lower middle market private equity, and strategic consolidators. The buyers pay us when a deal closes, not the seller. Connect on LinkedIn or get in touch.