M&A transactions can accelerate growth, shift market position, or define long-term value. However, some deals falter before completion due to bad luck, poor timing, and also because of avoidable missteps.
Drawing on L40° advisors' track record, the following insights reveal where deals most often fail to close, and how a disciplined, experienced team creates the conditions for success. For founders preparing for a sale, these learnings offer a cautionary lens and a roadmap toward better outcomes.
1. The myth of the inevitable deal
Many founders assume that once a buyer is engaged and a letter of intent is signed, the deal is done. But that is not the case.
In reality, even late-stage deals can fall apart due to shifts in buyer strategy, red flags uncovered during diligence, or changing market conditions.
A disciplined sell-side advisor plays a critical role in navigating this stage, ensuring that diligence is proactively managed to surface and address potential red flags before they become deal-breakers. This minimizes surprises post-LOI and helps keep the process on track, with clear communication, milestone pacing, and contingency planning throughout.
2. Misaligned founder and buyer expectations
Disagreement over valuation or deal structure is one of the most frequent and avoidable reasons deals collapse. Founders, understandably, focus on top-line numbers and growth forecasts. But buyers also evaluate factors like risk, synergies, post-close integration, and strategic alignment.
“Valuation guidance needs to be grounded in the specifics of each business, industry, and market cycle,” says Manuel Amor, partner at L40º. “If advisors aren’t rigorous in how they benchmark value, it can quickly undermine credibility and weaken the deal.”
An advisor serves as translator and strategist, aligning founder expectations with market dynamics. They help articulate value in buyer terms, clarify how risk is priced, and structure deals that reflect the priorities of both sides.
Recommended: What Makes SaaS M&A Deals Different
3. Weak financial storytelling and diligence prep
Deals collapse when sellers can’t present a credible, data-backed growth narrative or withstand buyer scrutiny. Advisors play a critical role in building robust data rooms, positioning KPIs, and stress-testing the story before buyers ever see it.
L40º Managing Director and Founder, Juan Ignacio Garcia, brings a deep background in investment banking, with experience at leading firms including Portobello Capital and Merrill Lynch. He consistently emphasizes the importance of the quality of information provided as well as how it is presented. Whether it’s deciding between monthly or quarterly financial reporting, or flagging what might sit behind a specific P&L line item, precision matters. The devil is always in the details.
“The quality of financial storytelling can determine the pace and confidence of a process. What seems like a small inconsistency can raise real concern for a buyer, and M&A advisors know how to eliminate that friction before it surfaces," says Garcia.
According to a PwC survey, the majority of executives (80% of respondents) say their last transaction taught them they need to do a better job of due diligence to validate their pre-deal hypothesis and assess whether a potential acquisition will support strategic priorities.
Read: When to sell your business?
4. Choosing the wrong buyer universe
Founders often fixate on brand-name strategics or "highest bidders" while neglecting fit, speed, or the basic, access to sufficient cash readily available. A misaligned buyer pool leads to false starts or drawn-out negotiations. Well-prepared advisors segment buyers based on real appetite, prior behavior, and deal execution capability.
As Ignacio Villanueva, Partner at L40º, always says: "Knowing when a buyer is serious is key to investing time and effort into the right conversations."
According to Bain & Company’s retrospective on M&A in 2024, “the best dealmakers are experimenting with ways to improve their processes for today’s market. For some, that means shifting more work from integration to how they get the deal done, sharpening the pencil on revenue synergies, not just cost synergies.”
They’re also placing greater emphasis on strategic screening, wrestling with valuations, and navigating negotiations with a clearer sense of which buyers are truly positioned to close.
Don’t miss: SaaS and the Rule of 40
5. Undervaluing process design and timing
Deals don’t just happen, they're engineered. One of the most common missteps is launching a process without the right pace or a clear narrative. When the timing feels off or the story doesn’t land, momentum slows and leverage slips away. That’s where experienced advisors make a difference: they help shape the story, time the outreach, and keep the process moving in the right direction.
Having facilitated multiple deals in her career, this is one of the key considerations Andrea Balletbó typically brings up in her conversations.
"The story you tell, how you position your business depending on who is the buyer on the other end, and knowing when to bring in which type of buyer at each moment is key to building the competitive tension that will drive momentum and valuations", says Balletbó.
6. Internal misalignment among stakeholders
Even with a strong offer in place, differing views among board members, co-founders, or investors on valuation, timing, or terms often surface after an LOI, when misalignment becomes most costly. These tensions can delay negotiations, confuse buyers or ultimately force last-minute deal restructuring.
Experienced advisors play a critical role as neutral third parties. They help identify and resolve points of friction early, before they disrupt the process. This includes aligning stakeholders on deal strategy, scenario planning, and acceptable trade-offs under pressure.
Garciahas seen this dynamic play out repeatedly over the course of his career. As a former investment banker involved in billion-dollar IPOs and cross-border deals, as well asas co-founder of Cabify, an Uber competitor, he understands how internal dynamics can shape a transaction.
"Misalignment doesn’t always show up in the data room. It happens in side conversations. In my experience, the sooner it’s addressed, the more resilient the process becomes".
7. Underestimating the emotional and operational toll
Many founders experience burnout, decision fatigue, or emotional swings during a deal, which is understandable considering these are high-stakes decisions made under pressure, often while still running the day-to-day business. That strain can cloud judgment, slow execution, or lead to second-guessing at critical moments.
The emotional toll of selling a company, especially one you’ve built from the ground up, is easy to underestimate.
Good advisors recognize this early. They step in to manage the pace, protect the founder’s focus, and serve as a buffer when negotiations heat up. By handling the issues behind the scenes, they help founders stay clear-headed and keep the business on track.
8. Letting diligence turn into renegotiation
Buyers often push for renegotiating terms when diligence reveals surprises: lower valuations or more restrictive terms. The risk is exceptionally high when financials, contracts, or retention plans are disorganized. Advisors act preemptively to prepare clean materials and control post-LOI dynamics.
When diligence exposes inconsistencies like missing documents or outdated numbers, it can erode trust and invite buyers to reopen key terms. That shift often marks the start of a more defensive process and introduces risk to valuation and timeline.
A well-prepared advisor mitigates this by pressure-testing the data room before it goes live, flagging sensitive areas early, and shaping buyer expectations from the outset. Clean documentation and narrative consistency are the best defenses against post-LOI surprises.
M&A advisors can help you prevent failure
The best advisors spot weak points before they become liabilities and bring foresight that internal teams alone can’t replicate.
At L40º, we’ve been in the room for the tough conversations, the turning points, and the unexpected twists that come with selling a business. We know how much is on the line for the company, the team, and you. If you're beginning to explore a sale or want a clearer picture of what it takes to succeed, L40º can help you prepare thoughtfully and execute with discretion and resolve. Contact us.
