Now Flip It: Why Do Buyers Walk Away from Business Acquisitions?

In the world of mergers and acquisitions (M&A), much of the focus tends to revolve around the seller's journey: preparing for exit, navigating valuation, and letting go of a business built over years or decades. But what about the buyer's side?

Buyers—especially institutional investors, family offices, and strategic acquirers—face a gauntlet of decisions, unknowns, and risks. Even with serious interest and intent, many deals fall apart during due diligence or negotiation.

So, let’s take a look from the buyer's lens.

What makes a deal fall through? Why do buyers walk away, even after months of discussion? Understanding these reasons is key not only for prospective buyers but also for sellers who want to position their businesses more effectively and avoid costly missteps.

At The Funding Assembly (TFA), a data-driven M&A platform based in Singapore, we are specializing in the buying and selling of small to medium-sized businesses (SMEs) in the food and beverage (F&B) industry across Southeast Asia. By working closely with both buyers and sellers, we’ve seen first-hand what truly makes or breaks a deal.

Here are the most common reasons buyers step away from M&A deals—and how sellers can proactively address them.

1. Red Flags in Due Diligence

Due diligence is where many deals go to die.

Buyers initiate due diligence to verify the financial, legal, and operational health of a business. This process is rigorous, especially when private equity firms or institutional buyers are involved. It involves combing through tax returns, sales data, customer contracts, lease agreements, licenses, HR policies, and more.

Common red flags include:

Undeclared liabilities or off-balance sheet debts
Unlicensed operations or regulatory gaps
Tax non-compliance or litigation risks
Over-reliance on a single supplier or customer (more than 30% revenue concentration)
Undocumented employment practices or high employee turnover

Buyers interpret these red flags as hidden risks. Sellers should consider conducting a mock due diligence process and address weaknesses before listing.

Full transparency and clear documentation build trust and credibility.

2. Weak Quality of Earnings (QoE) or Accounting Surprises

Even if topline revenue looks strong, buyers dig deep into the Quality of Earnings (QoE) to assess whether that revenue is sustainable, recurring, and clean.

Key warning signs:

Inflated earnings due to one-time windfalls (e.g., grants or non-operating revenue)
Aggressive revenue recognition practices that frontload income
Unusual or discretionary expenses that are poorly documented
Poor cash flow management, with vendors or landlords unpaid

Sellers who work with professional accountants or engage a QoE specialist early signal maturity and professionalism. A clean QoE report provides clarity and reassures buyers that there are no financial landmines hidden beneath surface-level profitability.

3. Unrealistic Financial Projections

Buyers aren’t just buying what your business is—they’re buying what it could become.

While optimism is expected, unrealistic projections without evidence or strategy instantly raise eyebrows. If your financial model assumes hockey-stick growth without explanation, buyers will question its credibility.

Buyers want to see:

Growth assumptions backed by market trends and consumer behavior
Specific operational or marketing levers that support revenue expansion
Conservative case scenarios in addition to aggressive targets
Clear capex or hiring plans that justify scale-up efforts

Well-supported, data-driven projections show that sellers understand their market and have a tangible plan for the future.

4. Complications in Debt Financing

In many cases, buyers rely on bank loans, private equity, or syndicate investors to fund the acquisition. If any part of this capital stack becomes uncertain, the deal can collapse.

Factors affecting financing include:

High interest rates or tightening credit markets
Weak balance sheets or low EBITDA margins that don't meet lender thresholds
External economic volatility or regulatory risks
Lack of collateral or asset backing in the target company

Sellers should seek clarity from buyers on their funding source. Flexible sellers who accommodate staged payments, seller financing, or earn-out structures can often salvage deals otherwise strained by financing delays.

5. Cultural Misalignment

M&A is not just about numbers—it’s about people, teams, and operational philosophies.

A buyer who sees a company with poor workplace culture, communication gaps, or low morale might be hesitant to integrate. They’re inheriting not just assets, but people.

Cultural red flags include:

Top-down leadership styles resistant to feedback or transparency
Poor employee retention or lack of training systems
Values that clash with buyer’s ESG or brand principles

Sellers can preempt this by documenting their team values, leadership style, and showcasing testimonials or employee satisfaction surveys. This reassures buyers that integration will be smooth and respectful.

6. Unclear Post-Acquisition Leadership Plan

Buyers are wary of “founder-led” businesses with no bench strength.

If the seller is the face, operator, and key decision-maker—and there’s no second-in-command—it becomes a risky buy.

To counter this:

Build and empower a second-tier management team (ops head, finance lead, etc.)
Provide detailed SOPs, training documents, and customer relationship histories
Offer post-sale transition support (e.g., 6–12 months consultancy)
Consider board advisory roles post-exit to retain knowledge continuity

A business with strong institutional memory and operational independence is far more attractive.

7. Integration Risk vs. Purchase Price

Buyers compare the effort of integration with the strategic upside.

If your business uses outdated software, manual inventory tracking, fragmented accounting systems, or paper-based compliance, the integration burden becomes heavy.

Even worse, if buyer systems are highly digitized, the gap may be too wide.

To reduce this risk:

Adopt basic digital tools (e.g., POS systems, cloud accounting)
Clean up your customer database, HR files, supplier records
Standardize processes across outlets or departments

Sellers who can present a tech-forward, standardized, and scalable operation mitigate this integration burden—and justify higher multiples.

What Sellers Can Do: Proactive Strategies to Win Buyer Confidence

Selling a business is not about impressing buyers—it’s about building trust through readiness.

At The Funding Assembly, we equip sellers with real-world, practical strategies to boost buyer confidence and improve closing outcomes. Here’s what we recommend:

1. Pre-Due Diligence Audit

Anticipate the buyer's lens. Engage your accountants, lawyers, and advisors to do a pre-market audit. This enables early issue resolution and positions the business professionally.

2. Valuation Benchmarking

Avoid pricing yourself out of the market. Use real comparable sales data and current market sentiment. Present multiple valuation scenarios: asset-based, income-based, and market-based.

3. Storytelling Through Data

Don’t just share facts—craft a compelling story. Why was the business started? What problem does it solve? Who is your loyal customer base? How are you different from competitors? Support this story with retention rates, customer reviews, and performance KPIs.

4. Legal and Tax Clean-Up

Ensure contracts, permits, trademarks, NDAs, supplier agreements, and tax filings are in order. Buyers appreciate clean, consistent, and searchable documentation.

5. Create Buyer Personas

Tailor your pitch to the right buyer. A strategic buyer values market entry; a private equity firm wants profitability; a family office may prioritize legacy. Knowing your ideal buyer helps you craft aligned messaging.

6. Flexible Deal Structures

Be open to partial exits, earn-outs, or phased handovers. Consider a 70-30 upfront-deferred structure, or performance-based milestone payments. Creativity here can unlock negotiations.

The Funding Assembly: Built for the Buyer and the Seller

The Funding Assembly (TFA) is more than just an M&A intermediary. We are building a full-stack, data-driven platform transforming the way SME deals are done across Southeast Asia.

Our edge lies in:

Qualified Buyers: We vet buyers for intent, funding readiness, and acquisition criteria.
Automated Deal Flow: From NDA to term sheet, our system manages compliance, communication, and progress tracking.
Zero Upfront Fees: We earn only on successful deal closures. Our incentives are fully aligned with yours.
Specialization in F&B: We understand the rhythms, risks, and margins of restaurants, kiosks, cloud kitchens, and food distributors.

Conclusion: Aligning Risk, Return, and Relationship

Buyers don’t walk away without cause. Deals fail because perceived risks outpace perceived rewards.

But with transparency, planning, and partnership, sellers can mitigate those risks—and present their businesses as ready, stable, and scalable.

Whether you're a founder looking to retire, an operator seeking capital injection, or a group exploring strategic acquisition—TFA helps both sides move with clarity and conviction.

Ready to unlock your business’s next chapter? Let’s talk.