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Dead Deal Report: Breaking Down 2024’s Broken LOIs
Various factors can cause a deal to fall apart—financing challenges, EBITDA discrepancies, and diligence findings, among others. However, with the complexity of LOIs and unique deal structures, pinpointing a single cause is rarely straightforward.
To better understand why some deals broke down, we reviewed a selection of Axial-sourced deals with executed LOIs that fell apart in 2024. The findings below are based on 65 unsuccessful transactions across seven buyer types and nine industries. We are grateful to the Axial members who provided the data and useful color on these transactions.
Broken Executed LOIs By Reason
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Select Broken Executed LOIs
| Buyer Type | Industry | Reason | Anecdote |
|---|---|---|---|
| Private Equity | Healthcare Services | Non-QoE Diligence Finding | The deal died when legal and regulatory issues were uncovered during diligence became worse. |
| Independent Sponsor | Food & Hospitality, Manufacturing | Business Underperformance | The company missed its 2023 budget. |
| Search Fund | Consumer Goods, Manufacturing | QoE EBITDA Discrepancies | The deal fell apart after it came back $1M less in EBITDA in dilligence. |
| Family Office | Arts & Entertainment Services | Renegotiation | The seller changed their asking, and the deal fell apart. |
| Individual Investor | Healthcare Manufacturing | Seller Backed Out | The seller was dealing with serious family and elected not to sell the business. |
| Independent Sponsor | Financial Services | Couldn't Secure Financing | The financing costs were too high to make it work. |
| Private Equity | Industrials, Manufacturing | Non-QoE Diligence Finding | Material diligence issue was uncovered - the equipment being used by the business was not compatible with what the firm was using. |
| Independent Sponsor | Transportation Services | Couldn't Secure Financing | The firm was unable to secure the equity for the capital raise after engaging with all the matched investors. |
| Private Equity | Business Services | Business Underperformance | Business performance dropped below the levels the buyer had underwritten in the LOI, and they weren't able to agree on new terms. |
| Holding Company | Consumer Goods, Construction | Non-QoE Diligence Finding | The biggest issue was employee retention risk, which came out during diligence. |
| Search Fund | Industrials, Construction | Renegotiation | The buyer found something material last minute, which prompted a renegotiation, and the seller was unable to budge. |
| Independent Sponsor | Business Services | QoE EBITDA Discrepancies | During due diligence, it was discovered that the add-backs and various financial items were severely misrepresented. |
| Search Fund | Technology Software | Other | The investors were unable to get comfortable with certain risks due to the nature of business and the industry. |
| Holding Company | Industrials, Construction | Business Underperformance | The reported EBITDA dropped from $1M to 200K. |
| Independent Sponsor | Industrials, Distribution | Other | The buyer backed out because the had a better opportunity come up. |
2024 Deal Data | Broken Executed LOIs
| Buyer Type | Avg. Revenue | Avg. EBITDA | Avg. Multiple | Avg. Days* |
|---|---|---|---|---|
| Independent Sponsor | $17,880,968 | $3,954,287 | 6.28 | 129 |
| Private Equity | $9,385,550 | $2,872,027 | 7.50 | 154 |
| Search Fund | $14,486,406 | $2,735,874 | 4.86 | 87 |
| Holding Company | $4,147,935 | $966,887 | 5.50 | 105 |
| Corporation | $6,351,250 | $790,714 | 3.24 | 66 |
| Family Office | $5,890,813 | $1,524,263 | 5.40 | 75 |
| Individual Investor | $4,773,627 | $1,999,419 | 2.63 | 104 |
| Industry | Avg. Revenue | Avg. EBITDA | Avg. Multiple | Avg. Days* |
|---|---|---|---|---|
| Industrials | $8,844,988 | $2,495,197 | 5.47 | 136 |
| Business Services | $9,983,399 | $1,553,277 | 8.26 | 81 |
| Healthcare | $11,921,199 | $3,432,317 | 6.40 | 127 |
| Technology | $11,420,000 | $4,282,000 | 4.77 | 61 |
| Transportation | $16,268,833 | $3,079,476 | 3.84 | 58 |
| Food & Hospitality | $22,754,514 | $3,902,587 | 7.08 | 203 |
| Consumer Goods | $20,220,913 | $2,371,186 | 3.97 | 73 |
| Financial Services | $7,410,000 | $2,260,000 | 8.72 | 77 |
| Arts & Entertainment | $6,321,626 | $1,123,527 | 4.36 | 84 |
*Average days the deal was under exclusivity before breaking
To better understand the market, we reviewed why LOIs fell apart in 2023 vs. 2024 to identify trends in whether an executed LOI goes on to close or break. Below is a year-over-year comparison of the reasons LOIs fell apart.
Broken Executed LOIs By Reason | 2023 v. 2024
In 2024, reported broken LOIs fell apart more often due to Non-QoE diligence findings (19.1% → 21.5%) and QoE EBITDA discrepancies (10.6% → 15.4%), suggesting increased scrutiny or declining financial transparency. Fewer deals failed due to financing challenges (21.3% → 13.8%), which could indicate better credit access or stronger buyers. The rise in business underperformance as a deal breaker (4.3% → 12.3%) might reflect more missed projections or operational struggles. Meanwhile, the decline in renegotiation-related failures (14.9% → 10.8%) could suggest stronger initial deal structuring or less willingness to revisit terms.
Additional Resources
Exit Ready is Axial’s bi-weekly newsletter that distills the best content, tips, and guides for exit-minded business owners. Below are a few resources from the newsletter that we hope are helpful and can aid in better preparation for the transaction process.
To subscribe to Exit Ready, enter your email below.
- Understanding Sell-Side Advisory Services for Small Businesses
- Small Business Exit Strategy: How to Exit Your Business Through an M&A Process
- What Buyers Want: Deal Demand by EBITDA Range
- eBook -> 12 Things Not to Do in M&A: A business owner’s guide on how to best approach the mergers & acquisition process.
To help Axial members navigate financial diligence, we’ve secured preferred relationships with several lower middle market QoE providers. If you’re an Axial member and need to put a sell-side or buyside QoE in motion, let us know here. We’ll be happy to make some introductions.
Axial is the trusted deal platform serving the lower middle market ($2.5-$250M TEV).
Over 3,500 advisory firms and 3,000 corporate and financial buyers have joined Axial to efficiently connect with relevant capital partners, source actionable deals, and build new relationships.
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