Frequent Deal-Making Mistakes

Selling businesses and doing deals is often a long and arduous process. Preparation and anticipating potential fires in the deal process is essential for deal-making success. Here are a few speed bumps to consider on the road to getting the deal done in a timely, efficient manner.

• Doing deals is a complex machine with hundreds and even thousands of cogs.
• Starting a deal just because it’s a deal and beginning with no other reason than that.
• Failing to have a strategy for the inevitable hiccups. The biggest problem is lack of anticipation of things that could go wrong. If you anticipate, you can at least not be surprised when the ‘best plans of mice and men go awry.’
• Beginning deal talks without fully understanding (or wanting to understand) the other party’s motivation for buying or selling.
• Asking for too little or taking too much cash off the table. This may be prudent given that you may be attempting to buy low and sell high, but don’t be surprised if feet-dragging takes place on the part of the seller later as they’re not going to be as motivated and may have very negative feelings toward you as the buyer.
• Taking your eye off the ball. Some will move to deal 2 before deal 1 has closed. This can cause you to lose both deals. Stay focused. Stay disciplined.
• Failing to mitigate risk. Many risks are involved in deal-making — if you fail to predict or control for them, you can eventually lose your shirt. Example: working 9 months on a deal that blows up with nothing in the pipeline will create an even bigger explosion with your investors.
• You may fail to fully incentivize, motivate and altogether “fire-up” the other side of the table. When they’re motivated, deals get done.
• Failing to calculate or fully articulate the expected return on investment from the deal in your own mind and in the mind of your investors.
• Failing to fully anticipate how both parties will work together to resolve all of the challenges of working through the deal process. In some cases, this means failing to know when your sell-side process has run its course and a strategic pivot is necessary.

In short, don’t jump in right away. You’ll fully need to do all your homework before beginning the deal process. If not, the deal itself will end up lasting much longer than originally anticipated, which increases the likelihood of things souring.

When this happens, the rabbits get scared. In other words, the targets flee the scene and you end up with a lose-lose scenario. Understanding the basic rules for deal-making before you enter a process can dramatically reduce the likelihood of these outcomes.

Why Deals Die: A Deeper Look at the Most Damaging Mistakes

The list above captures the structural errors, but it’s worth examining the mechanics behind the most deal-killing mistakes practitioners encounter most often.

Misaligned Motivation

One of the most underestimated deal killers is a seller who has not genuinely decided to sell. They may be testing the market, seeking a valuation for estate purposes, or responding to pressure from partners. A sophisticated buyer reading the room can usually detect this early — but many do not, and they invest months of time and legal fees before the seller quietly withdraws. Vetting motivation on both sides of the table before committing resources is not optional; it is foundational diligence.

Inadequate Deal Structure

Price gets the headlines, but structure kills deals. Earnouts, seller notes, non-compete agreements, indemnification caps, and escrow arrangements all represent negotiated risk allocation. When parties approach structure as a zero-sum battle rather than a creative problem-solving exercise, deals stall. Buyers who understand acquisition financing structures are far better positioned to propose terms that work for both sides.

Diligence Surprises

Nothing derails a deal faster than a diligence finding that contradicts representations made during the letter of intent phase. A normalized EBITDA that collapses under scrutiny, environmental liabilities, key-man risk, or undisclosed customer concentration — all of these are recoverable if disclosed early. Discovered late, they either kill the deal or trigger a significant price reduction and adversarial renegotiation.

Sellers who conduct proactive diligence tracking before going to market — identifying and documenting potential issues in advance — consistently achieve cleaner processes and better outcomes.

Building a Deal-Ready Organization

The most effective way to avoid deal-making mistakes is not reactive — it is proactive preparation before a process begins. That means:

• Clean, audited or reviewed financial statements for at least three trailing years
• A documented management team with clear succession beyond the founder
• Organized legal and IP documentation (contracts, licenses, patents, employment agreements)
• A customer concentration analysis that demonstrates no single customer exceeds a defensible threshold
• A clear articulation of the business’s competitive moat and why it is durable

Advisors working from a structured deal closing checklist can help sellers anticipate buyer objections before they arise, rather than responding to them under time pressure during exclusivity.

Frequently Asked Questions

What is the single most common reason deals fail to close?

Diligence surprises are the most common proximate cause of deal failure, but the underlying driver is almost always inadequate preparation. Sellers who have not stress-tested their own numbers, identified key risks in advance, and prepared clear answers to predictable questions will face challenges during diligence that could have been resolved before the process began.

How do you keep deal momentum once a letter of intent is signed?

Maintain a detailed project timeline with clear ownership for every open item. Both sides should agree on a diligence information request list at the outset, set a target closing date, and review progress weekly. Momentum is primarily a function of responsiveness — slow information delivery from the seller’s side is the most common cause of schedule slippage.

When should a deal team consider walking away?

Walking away is appropriate when a material misrepresentation is discovered, when deal terms have been renegotiated to the point the original thesis no longer holds, or when cultural and operational incompatibilities suggest the post-close integration will destroy more value than the transaction creates. Walking away is a skill, not a failure. As the article notes, understanding when and why to sell (or not) is as important as the deal process itself.