Where Business Sales Deals Break Down (Attorney Perspective)
If you handle business sales with any regularity, you already know this:
Most deals don’t fall apart in diligence.
They fall apart before that—in the structure, the expectations, and the early documents that are supposed to “set the tone.”
I see the same pressure points over and over again across transactions. And most of them are avoidable with better front-end thinking.
Here are a few of the most common places deals start to break down.
1. The LOI Is Too Vague
Letters of intent are often treated like a placeholder:
“We’ll figure it out in the APA.”
That’s where problems start.
When key deal terms aren’t clearly addressed in the LOI—things like:
- Working capital approach
- Treatment of accounts receivable
- Seller financing structure
- Transition expectations
—you’re not deferring the issue. You’re creating leverage for later conflict.
By the time you’re drafting the purchase agreement, both sides think they already have a deal. That’s when disagreements become emotional and positional instead of strategic.
The LOI doesn’t need to be overly legal but it does need to be intentional. It should frame the deal, not just memorialize interest.
2. Working Capital Is Not Thought Through Early
Working capital is one of the most common sources of post-LOI tension.
Typical scenario:
- Buyer assumes a normalized level of working capital will be delivered
- Seller assumes they’re just handing over whatever exists at closing
If this isn’t addressed early, you end up negotiating it at the worst possible time—when everyone is already deep into the deal.
Even worse, vague language leads to:
- Disputes over what’s included
- Arguments about historical averages
- Unexpected purchase price adjustments
Working capital isn’t a “back-end accounting issue.” It’s a core economic term that should be aligned on early.
3. Due Diligence Becomes a Surprise Instead of a Process
Diligence should confirm assumptions—not introduce entirely new ones.
But when expectations aren’t set clearly:
- Buyers dig deeper than sellers anticipated
- Sellers feel like the scope is expanding
- Timelines start slipping
This often leads to:
- Friction
- Distrust
- Renegotiation attempts
And once a deal shifts into a renegotiation posture, it’s much harder to get it back on track.
Set expectations around diligence early—scope, timing, and purpose. It keeps the process moving and avoids unnecessary escalation.
4. Seller Financing Isn’t Fully Modeled
Seller notes are common, especially in deals where:
- SBA financing is involved
- Buyers need flexibility on cash at close
But the structure is often underdeveloped at the LOI stage.
Issues that come up later:
- Payment terms vs. SBA restrictions
- Security and guarantees
- Offset rights
- Conditions for forgiveness (if any)
Without clarity, seller financing can quickly become a sticking point rather than a bridge.
If seller financing is part of the deal, treat it like a real financial instrument, not a placeholder.
5. Transition Expectations Are Undervalued
Post-closing transition is often addressed in a sentence or two:
“Seller will assist with transition.”
That’s rarely enough.
In reality, transition support can be critical to:
- Customer retention
- Operational continuity
- Employee stability
When it’s not clearly defined, you risk:
- Misaligned expectations
- Burnout or disengagement from the seller
- Gaps in continuity
Transition isn’t an afterthought—it’s part of the value being transferred.
Final Thought
Most of these issues aren’t about bad actors or difficult clients.
They’re about lack of clarity at the right stage of the deal.
When the front-end of the transaction is structured thoughtfully, the rest of the process tends to follow. When it isn’t, you spend the rest of the deal trying to unwind misunderstandings.
Want more?
I break these issues down in more detail—including how to structure LOIs, working capital provisions, and core deal terms—in my Arizona CLE course:
👉 Arizona CLE: Handling Business Sales & Acquisitions
https://constantcounsel.com/buy-cle/