- Financing doesn't come through Most buyers aren't paying entirely in cash, and lenders assessing a business acquisition can take longer, and demand more, than buyers expect.
- Due diligence uncovers something unexpected Due diligence exists to test what the seller has represented about the business, and it regularly surfaces things that change the buyer's…
- The landlord won't consent to the lease assignment For any business tied to a physical location, the commercial lease is often as important as the business itself.
Signing a letter of intent feels like the hard part is over. In practice, it's often just the starting gun — reaching an LOI is no guarantee that a deal will close. Most of the time, it isn't one dramatic event that kills a deal. It's a handful of recurring, largely predictable problems that surface during due diligence and negotiation.
Knowing what typically derails a deal — before it happens to yours — is one of the most practical things a buyer or seller can do. Here are the reasons that come up most often.
Money and Deal-Terms Problems
Financing doesn't come through
Most buyers aren't paying entirely in cash, and lenders assessing a business acquisition can take longer, and demand more, than buyers expect. A financing condition exists precisely to handle this, but the underlying problem — a lender declining the file, offering worse terms than expected, or simply not finishing its assessment before the deadline — is one of the single most common reasons deals stall or collapse. Buyers who start the financing process only after signing an LOI are especially exposed here.
The parties can't agree on price adjustments
Even after a headline price is agreed in an LOI, most purchase agreements include mechanisms — working-capital adjustments, holdbacks for post-closing indemnity claims — that can move the effective price meaningfully by closing. Disagreements over how these adjustments should be calculated, or disputes about what due diligence findings are "worth" in renegotiated price terms, are a frequent late-stage deal-killer.
Valuation gaps that were never really closed
Sometimes an LOI papers over a valuation disagreement that both sides hoped due diligence would resolve in their favour. When due diligence instead confirms each side's differing view of value — the buyer sees more risk, the seller sees the same strong numbers — the gap can prove unbridgeable, especially without a professional valuation both sides trust.
Diligence and Compliance Surprises
Due diligence uncovers something unexpected
Due diligence exists to test what the seller has represented about the business, and it regularly surfaces things that change the buyer's calculus: financial statements that don't hold up to closer scrutiny, undisclosed liabilities, contracts that aren't assignable, pending or threatened litigation, or compliance gaps in licensing and permits. Sometimes these issues are resolvable through a price adjustment or an indemnity; sometimes they're serious enough that a buyer walks away entirely.
Regulatory or approval issues surface late
Businesses that require licences, permits, or sector-specific regulatory approval to operate can run into transfer or re-application requirements that take longer, or prove harder, than either side anticipated. Larger or foreign-involved deals can also trigger Competition Act or Investment Canada Act review requirements that weren't factored into the original timeline.
Third-Party Consents That Don't Come Through
The landlord won't consent to the lease assignment
For any business tied to a physical location, the commercial lease is often as important as the business itself. A landlord who delays, refuses, or attaches unreasonable conditions to consenting to a lease assignment can stall or sink a deal outright — particularly where the purchase agreement makes landlord consent a closing condition and no fallback location or workaround exists.
Other third-party consents aren't obtained
Leases aren't the only contracts requiring consent to assign — supplier agreements, franchise agreements, equipment financing, key customer contracts, and licences or permits can all include change-of-control or assignment restrictions. A single stubborn counterparty can hold up an otherwise-ready deal.
People Problems
Key employees or the seller's continued involvement fall apart
Deals built around retaining specific employees, or around the seller staying on for a transition period, can unravel if those arrangements fall through — an employee gives notice, negotiations over the seller's post-closing role or non-compete stall, or the buyer and seller can't agree on transition terms. This is especially common in owner-dependent businesses where the seller's personal relationships and know-how are a major part of what's being bought.
The buyer or seller gets cold feet
Not every collapsed deal has a clean legal explanation. Sometimes a party simply has second thoughts — the buyer finds a more attractive opportunity, the seller isn't emotionally ready to let go of a business they built, or one side decides the deal no longer feels worth the friction. This is exactly the kind of scenario where a properly drafted agreement (deposit terms, break fees, remedies clauses) matters most, because "cold feet" alone generally isn't a valid legal ground to walk away once an unconditional agreement is signed.
Readiness Problems
One side wasn't ready for what closing actually requires
Especially on the seller's side, gathering everything a closing requires — corporate records, a clean minute book, resolved title or lien issues, employee records, tax filings in good standing — can take longer than expected if the business's records weren't well organized going in. A seller who isn't prepared for the volume of documentation a serious buyer's counsel will request can inadvertently stall their own deal.
How to Protect Your Deal From These Risks
- [ ] Start financing discussions before, not after, signing an LOI.
- [ ] Get organized on records and disclosure early if you're the seller — don't wait for due diligence requests to start assembling them.
- [ ] Approach the landlord (and any other counterparties requiring consent) as early as the deal timeline allows.
- [ ] Build realistic conditions and deadlines into the purchase agreement, rather than optimistic best-case ones.
- [ ] Address price-adjustment mechanics (working capital, holdbacks) clearly in the agreement itself, not as an afterthought.
- [ ] Loop in a lawyer and accountant early enough that they can flag problems before they become deal-threatening, not after.
Frequently asked questions
Is it normal for a business sale to fall through?
Deals falling apart before closing is a routine part of the process rather than a rare exception, which is exactly why experienced buyers and sellers build realistic conditions, timelines, and exit terms into their agreements rather than assuming a signed LOI guarantees a completed sale.
Can a fallen-through deal be revived later?
Sometimes. If the underlying issue is resolved — financing is secured elsewhere, a landlord's concerns are addressed, a valuation gap narrows — the same parties can and do restart negotiations, though momentum and trust are harder to rebuild the second time around.
Who usually bears the cost when a deal collapses?
It depends on why it collapsed and what the purchase agreement says. Professional fees are often borne by each side regardless of outcome, while deposits and break fees may shift depending on which party's conduct caused the collapse.
What's the single biggest thing I can do to avoid my own deal falling through?
There's no single fix, but starting due diligence, financing, and third-party consent processes early addresses the largest share of common deal-killers described above.
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