Deal Process · August 2026
Why One in Three Signed Deals Never Close
Signing a letter of intent feels like the finish line. It isn't — it's closer to a first date that's gone well enough to plan a wedding.
A widely cited industry estimate holds that roughly one in three signed letters of intent never make it to a closed deal.
A lot can still happen between LOI and closing, and the 2025 data on why deals collapse is more useful than the headline number — because most of the leading causes are preventable.
What actually kills a signed deal
Axial, a network that tracks middle-market deal flow, analyzed 75 collapsed transactions from 2025:
- Non-QoE diligence findings — 25.3%. Something in the business that surfaces during buyer diligence and wasn't disclosed or wasn't known. One buyer in the report walked after learning 40% of a target's revenue came from a single government sponsorship in one state — a concentration problem exactly like the one covered in the first article in this series.
- QoE / EBITDA discrepancies — 21.3%. The buyer's earnings analysis doesn't support the number the deal was priced on. In one example, a buyer's diligence found the seller's banker had overstated EBITDA by 25% — a gap large enough to end the deal outright.
- Renegotiations and re-trades — 14.7%. The buyer comes back after the LOI asking for a lower price or different terms, often using a diligence finding as leverage.
- Sellers backing out — 13.3%. Cold feet, a competing offer, or a change of circumstances on the seller's side.
- Financing falling through — 10.7%. The buyer's capital doesn't materialize as planned.
- Business underperformance and other causes — roughly 15% combined.
The trend line matters as much as the snapshot: diligence findings unrelated to earnings climbed steadily, from 19.1% of failed deals in 2023 to 21.5% in 2024 to 25.3% in 2025, while financing-related failures fell as credit conditions eased. The market has gotten better at funding deals and worse at forgiving sellers who weren't fully prepared for what diligence would find.
What this means if you're planning to sell
The two largest causes of deal failure — diligence surprises and earnings discrepancies — are almost entirely within a seller's control before a buyer ever sees the business. Get your own QoE review done before you go to market, not after a buyer asks for one. Get contracts, licenses, and any legal exposure organized and disclosed early. Go into a process with a realistic, defensible number rather than an optimistic one a buyer's diligence team is likely to erode anyway.
The takeaway
A signed LOI is a milestone, not a guarantee. The sellers who make it from LOI to closing at the price they signed for are, disproportionately, the ones who did the unglamorous prep work — clean numbers, organized documents, realistic pricing — months before a buyer ever asked to see any of it.
