Why Do Business Sales Fall Through? A Medical Practice Case Study

Quick answer: Business sales fall through most often after the letter of intent is signed, not before — and rarely because of price. Analysis of 75 broken letters of intent found that diligence findings, financial and non-financial combined, accounted for roughly 47% of failures, with renegotiation friction and seller decisions responsible for a further 28% (Axial, Dead Deal Report, 2025). In medical practice transactions, the pattern takes a particular form: a physician-owner encounters an unfamiliar deal term late in the process, reads it as bad faith, and prepares to walk. Money is seldom the problem. Surprise, complexity, and unmanaged emotion are — and all three belong to the advisor sitting between the parties.

You will be told that deals die over price. In our experience, they almost never do. They die three months after both sides agreed on price, over a provision nobody explained, at the moment a physician who has spent thirty years building something decides they are being taken advantage of. What follows is a real engagement — details anonymized — that came within one phone call of collapse. Twice. It is now in escrow, at a price above the valuation we prepared before we took it on. The gap between those two outcomes is the entire argument for how a practice sale should be run.

Why Do Business Sales Fall Through? What the Data Shows

In one line: Most failures happen under exclusivity — after both parties have already agreed on price.

The intuitive answer is that buyer and seller could not agree on a number. The data says otherwise. By the time a letter of intent is signed, price is broadly settled; what kills the transaction is what surfaces next. Axial’s review of 75 unsuccessful transactions in 2025 ranked the causes:

Read the top four rows together and a picture forms that has almost nothing to do with valuation. Something is found, the buyer asks to reprice or restructure, and the seller — who had mentally banked the original number — experiences the request as a betrayal rather than a negotiation. That sequence accounts for well over half of all failures.

How Often Does It Actually Happen?

Commonly cited industry estimates put the share of signed letters of intent that never reach closing at roughly 33% to 40%. Treat that as a working range rather than an audited statistic — no public registry tracks the outcomes of private letters of intent, so every figure in circulation is an estimate drawn from advisor experience and partial samples.

The operative point is not the exact percentage. It is that a signed LOI is a checkpoint, not a finish line, and that between a third and two-fifths of the deals that reach one do not survive it.

What is not in dispute is the direction of the causes. Financing constraints as a reason for failure fell from 21.3% in 2023 to 10.7% in 2025, while non-QoE diligence findings rose from 19.1% to 25.3% and quality-of-earnings discrepancies more than doubled, from 10.6% to 21.3% (Axial, 2025). These are drawn from samples of 47 to 75 deals, so read them as direction of travel rather than precision.

In plain terms: deals have stopped dying for lack of money. They are dying for lack of preparation.

How Long the Exposure Window Lasts

The risk period is not brief. Advisors surveyed in the first quarter of 2026 reported average total time to close of six to seven months for Main Street transactions under $1 million and nine months for everything above it, with the stretch from letter of intent to closing running two to four months and scaling with deal size (IBBA and M&A Source, Market Pulse Survey, Q1 2026).

That final leg is the exposed one: a period of several months in which the seller is off the market, exclusive to one buyer, absorbing diligence requests, and — if nobody has prepared them — meeting concepts like working capital for the first time.

The Case: A Practice Sale That Nearly Died Twice

In one line: Strong practice, competitive process, above-valuation offers — and it still came within a phone call of collapse, twice.

The practice was a well-established primary care operation built by a single physician over many years. Strong patient volume. A large senior patient base. And — the differentiator that anyone in healthcare recognizes immediately — value-based care delivered at a genuinely high level.

That combination of clinical quality and financial performance made it an attractive opportunity, and it drew the interest such a practice should draw.

None of which prevented the deal from nearly dying. Twice. That is the point of telling it.

How the Buyer Process Was Built

This is where a strategic advisor separates from a general business broker who lists a practice and waits. We ran preliminary virtual meetings with multiple qualified buyers and then advanced five of them through the process simultaneously and deliberately.

• Competition creates urgency. When a buyer knows other serious suitors are evaluating the same opportunity, behavior changes. They move faster, they are more decisive, and they put a stronger number on the table at the outset rather than opening low and testing.
• Three buyers verbally indicated offers. Two delivered. That attrition is normal and is precisely why you do not run a single-buyer process.
• Both offers landed within 5% of each other. Independent buyers converging that tightly is the clearest available evidence that a process has found the market rather than one buyer’s opinion of it.
• Both exceeded our own valuation. Each offer came in above the most probable selling price stated in the formal valuation we performed before the engagement began — a fact that became critically important months later, for reasons nobody anticipated at the time.

Why the Seller Took the Lower Offer

Our client selected the lower of the two offers. That surprises people, and it should not. The job is not to maximize a number in isolation; it is to find the best outcome for the client, and the two are not always the same instrument.

The selected buyer’s vision for the practice, commitment to the existing staff and patients, and overall profile were simply a better match — and with the offers within 5% of one another, the difference in fit was worth considerably more than the difference in price.

That last row deserves more weight than sellers usually give it. An offer is not a price; it is a probability multiplied by a price.

The First Break: A “Light” Letter of Intent

In one line: Every term you defer to the definitive purchase agreement is a term you have agreed to argue about later, with less leverage than you have now.

The selected buyer submitted what I would describe as a light letter of intent — a great deal of open-ended language and too many critical issues left to be decided later in the definitive purchase agreement.

It is a common tactic, and it is a trap for the seller. Once exclusivity is signed, the competitive pressure that produced the offer evaporates. Every question deferred past the LOI gets negotiated in a market of one.

We went back to our client and worked through a substantially more specific counter-proposal. A letter of intent should reflect real alignment between the parties on the terms that matter. If you cannot agree on the major points at the LOI stage, the definitive purchase agreement will not be a document — it will be a battleground.

This was the start of tension, and it should be said plainly: an experienced intermediary anticipates this moment. We built the counter, kept the communication professional and specific, and moved the negotiation forward. First crisis handled.

The Second Break: A Working Capital Provision Nobody Had Discussed

In one line: Working capital adjustments are standard in M&A and unknown to most physicians — which is exactly why they can become a major source of conflict.

Then a far more detailed counter-counter came back from the buyer’s attorney, and a working capital provision appeared in it. Working capital had never come up in the early buyer–seller meetings. It was not part of any conversation the parties had had. Our client was blindsided.

What Working Capital Means in a Practice Acquisition

Working capital refers to the cash and near-cash assets left behind in the business at closing to support ongoing operations — accounts receivable, cash on hand, prepaid expenses — net of the current liabilities that come with them.

A buyer taking over on a Monday still has to make payroll on Friday, and the collections funding that payroll were earned under the seller. The provision exists so the practice is handed over with enough fuel in the tank to keep running, and so neither party can quietly strip or stuff the balance sheet before closing.

It is not an ambush. Purchase price adjustments of this kind now appear in more than 90% of transactions, up from around 50% a decade ago, across a study of more than 1,500 private-target acquisitions (SRS Acquiom, Working Capital Purchase Price Adjustment Study, 2026).

A buyer who does not raise working capital is the anomaly.

But standard is not the same as expected. To a seller who has never been told it exists, a working capital provision arriving in an attorney’s redline three months into the process does not read as market practice. It reads as a raid.

Our seller heard the provision and felt the goalposts had moved. They were ready to walk away from a deal priced above our own valuation.

Why a Late Term Reads as Betrayal

In one line: Both parties were behaving reasonably, and the deal still nearly died.

This is exactly why it matters to have an experienced intermediary in the room. In that moment, emotions run high. The seller has worked an entire career building this practice. They feel the buyer is trying to take something extra at the last minute. The buyer, meanwhile, has cash flow concerns that are entirely legitimate — they are about to be responsible for a payroll, a lease, and a panel of patients.

Both perspectives are understandable. Both are defensible. And if the two parties are talking directly to each other in that emotional state, the deal is over.

There is a particular version of this in physician-owned practices. Our seller did not object to the economics of the provision, and he liked and trusted the buyer. What he could not tolerate was the feeling that someone he had believed in had been less than straight with him.

The technical issue was never the issue. The perceived breach of good faith was — and no counter-offer solves that, because it is not a contract problem.

What Actually Saved It: The Pause

In one line: The intervention was not a better counter-offer. It was time.

We had a meeting with our client and their attorney, and the seller was again on the verge of pulling out. Here is what we did instead of negotiating.

• We asked our client not to react immediately. Not unlike a parent declining to respond to a child in the moment, the discipline is to refuse the first impulse. Nothing that gets said in the first hour improves the outcome.
• We convened a meeting to communicate, not to negotiate. Both parties expressed their point of view, with no terms on the table. The LOI was revised again and we believed there was mutual understanding.
• When it resurfaced, we reframed against the baseline. I reminded our client of the competitive process we had run at the outset — and that it had produced an offer above the most probable selling price in the formal valuation we prepared before the engagement.
• We protected the buyer’s confidence without disclosing the seller’s state. We told the buyer we were working through details on our side and kept the lines open. We did not reveal the level of internal difficulty. A buyer who senses a seller wavering starts protecting themselves, and the deal enters a spiral neither party can stop.
• Then we stopped talking. We asked our client to take a few days, make no decision, and simply process the information.

The Seller Solved It

A few days later we met again, and the difference was remarkable. He had processed everything. He came in calm, clear-headed, and ready to problem-solve — and, the part I find most instructive, he brought the solution himself.

He proposed a structure that addressed the buyer’s working capital concern while protecting his own interests. Nobody sold it to him. He built it.

The deal is now back on track and moving into escrow. It survived because he was given the space to arrive at it — which is a very different advisory act from talking a client out of walking away.

Four Rules for Keeping a Practice Sale Together

In one line: Educate early, keep information moving, absorb the friction, and return the parties to the goal.

• Educate both sides early. Working capital, deal structure, what an LOI actually commits you to, how the true-up works — these need to be explained in plain language before a crisis, not during one. Surprises in a negotiation are never good, and every surprise is an advisory failure that happened weeks earlier.
• Keep the communication flowing. The moment information stops moving between the parties, fear fills the vacuum. We kept the buyer confident that we were working toward a resolution, and that confidence is what bought us the patience we needed on our side.
• The intermediary has to be the shield. Our client is emotionally invested in this deal, as they should be — they built something extraordinary. The job is to absorb the friction, translate the tension, and present solutions instead of ultimatums. Two principals negotiating directly through an emotional moment is how deals end.
• Keep the parties focused on the goal. Here the goal was the successful transfer of a thriving practice at a price above what we had projected. When you bring people back to the shared objective, the path forward usually becomes obvious on its own.

The Close Rate Gap and What Explains It

In one line: Staying in the deal after the introduction is the entire job.

Set the industry picture beside ours. Commonly cited estimates put the share of transactions that go under contract and never reach closing at roughly 33% to 40% — lost to diligence findings, renegotiation friction, financing problems, and emotional breakdowns in communication. The market is full of deals that should have closed and did not.

At Strategic Medical Brokers, our success rate once a listing goes under contract is 75%. That is not an accident, and it is not luck. It is because we stay in the deal. We do not introduce the buyer to the seller and step aside. We manage the process, we manage the expectations, and yes, we manage the emotions.

What “Staying in the Deal” Looks Like in Practice

• A formal valuation before the engagement begins, so there is an objective baseline to return to when the process gets hard.
• A competitive buyer process run deliberately, not a single buyer approached and hoped for.
• A letter of intent negotiated for specificity, so that diligence tests facts rather than reopening terms.
• Concepts explained before they appear in a redline — working capital, escrow, holdback, allocation, transition.
• One party in the middle who has seen the moment before and does not panic in it — the intermediary role, examined in full in our guide to what a business broker does.

Warning Signs Your Deal Is About to Fall Through

• Vague language in the LOI on price mechanics, working capital, or transition terms.
• A term appearing for the first time in an attorney’s draft that was never raised in a meeting.
• The seller starts describing the buyer’s motives rather than the buyer’s position.
• Communication slows — days between responses where there used to be hours.
• Principals begin talking directly about contested points, without the advisors present.
• Diligence keeps surfacing items the seller had not disclosed — each one costs credibility, and credibility is the currency of the back half of a deal.
• The seller’s attorney is unfamiliar with M&A and is treating the transaction like litigation or estate work.
• Either party starts referencing the sunk cost of the process rather than the merits of the deal.

Key Takeaways

• Roughly 33% to 40% of signed letters of intent never reach closing, on commonly cited industry estimates — and deals rarely fail over price. Diligence findings, renegotiation friction, and seller decisions account for the substantial majority of those failures (Axial, 2025).
• The dangerous window is after exclusivity — two to four months from LOI to close, scaling with deal size (IBBA and M&A Source, Q1 2026), during which the seller has no competing buyer and no leverage.
• A light letter of intent transfers negotiating power to the buyer. Every deferred term becomes a term negotiated in a market of one.
• Working capital adjustments appear in more than 90% of transactions (SRS Acquiom, 2026). A buyer raising one is behaving normally; a seller hearing it for the first time in diligence is an advisory failure.
• The highest offer is not automatically the best offer. An offer is a price multiplied by a probability of closing, and fit drives that probability.
• A competitive buyer process is not a negotiating trick. In this engagement it produced two independent offers within 5% of each other, both above the pre-engagement valuation.
• When a seller reaches an emotional break point, the correct intervention is usually time — not a counter-offer, and not persuasion.
• Sellers who are given room to process very often construct the solution themselves, and a solution the seller authored is the one that survives to closing.

Also Read: Common Mistakes to Avoid When Transferring Ownership of a Healthcare Business

Summary

This transaction did not come close to failing because of bad faith on either side. It nearly failed because of complexity, misunderstanding, and emotion — all three of which are completely normal in a transaction of this magnitude, and none of which appear anywhere in a valuation model.

A physician sold a practice they had spent decades building to a buyer they liked, at a price above what an independent valuation had projected, and it still took two rescues to get to escrow. That is not a story about an unusual deal. That is what a normal deal looks like from the inside, and it is why the industry’s close rate sits where it does.

The difference between a transaction that closes and one that does not is almost never the quality of the practice. It is whether someone in the room has seen the moment before, knows where the landmines sit, and is willing to say nothing while the client thinks.

The Bottom Line

If you are considering selling your medical practice, assume the hard moment is coming — because it is. Your protection is not optimism; it is preparation: an independent valuation established before you go to market, a competitive process that produces real alternatives, a letter of intent specific enough that diligence tests facts instead of reopening terms, and an advisor who stays in the deal from the valuation through the hard conversations to the closing table.

We have been through these situations before. We know where the landmines are, and our commitment is to get you to the finish line with the outcome you deserve.

If you want to understand your position — whether you plan to act this year or simply want the number — an independent medical practice valuation is where it starts. The consultation is confidential, and there is no obligation.

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