Many business owners treat a signed Letter of Intent as the moment the deal is “basically done.”
It isn’t.
Recent data analyzing 75 failed transactions in 2025 makes that painfully clear. These were not early conversations. These were executed LOIs — deals under exclusivity, with time and money already invested.
And yet they still fell apart.
What’s Actually Killing Deals
The leading cause of broken LOIs in 2025 wasn’t financing.
It was diligence.
Non-QoE diligence findings accounted for over 25% of failed transactions. These included undisclosed legal or compliance risks, contract problems, and customer concentration concerns. Quality-of-Earnings discrepancies followed closely at over 21%, where normalized EBITDA did not match what had been presented earlier in the process.
In other words: the numbers didn’t hold up.
Renegotiation challenges came next, often after diligence revealed issues that forced price or structure changes. Seller pullbacks and financing challenges were less common than in prior years. In fact, financing-related failures declined meaningfully from 2023 to 2025.
Capital was available.
Credibility was the issue.
The Expensive Reality of Broken LOIs
What makes this data more sobering is the time involved. Many of these transactions were under exclusivity for months before collapsing. Buyers had already spent significant sums on QoE work, legal fees, and third-party diligence.
One sponsor walked away after discovering EBITDA was overstated by hundreds of thousands of dollars. Others encountered undisclosed contract risks, government revenue exposure, or material performance declines during diligence.
These aren’t minor adjustments. These are deal-ending discoveries.
And they don’t just waste time — they erode trust.
What This Means for Sellers
The trend is clear: diligence-driven failures are increasing, not decreasing.
That tells us something important.
As capital markets stabilize and financing becomes more available, buyers are not lowering their standards. They are tightening them. Underwriting discipline has replaced capital scarcity as the primary gatekeeper.
For sellers, this means preparation cannot be cosmetic.
If EBITDA normalization isn’t defensible, it will surface. If contracts contain hidden risk, it will surface. If customer concentration is understated, it will surface. If assumptions don’t align with operational reality, it will surface. Often after months of work.
An LOI does not create value. It tests it.
The Real Takeaway
A signed LOI is a checkpoint, not a guarantee.
Deals today are increasingly decided in diligence — not in negotiation. That means the heavy lifting must happen before the business goes to market, not after exclusivity begins.
Owners who prepare early reduce surprises. Fewer surprises mean fewer renegotiations. Fewer renegotiations mean a higher likelihood of closing.
And in today’s environment, closing is what matters.
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