A quarter broke on a finding outside the earnings work.
Seventy-five letters of intent that were signed and then collapsed in 2025. What ended them, how long each kind of buyer held exclusivity before the letter died, and what the same findings cost when they surface after closing instead.
See what ended themA quarter broke on a finding outside the earnings work.
Seventy-five letters of intent that were signed and then collapsed. Three of the reported reasons, on one scale.
A lower-middle-market deal platform’s published study of broken letters of intent, January 27, 2026: seventy-five broken letters across eight buyer types and eight industries. These are three selected categories on a scale of 0 to 30 percent. They are not the full distribution and are not summed.
One seat finds the deal and runs it.
While the originator is executing a deal, nobody is finding the next one.
Turn overWhy it breaks
A live deal cannot wait, so execution wins every time and origination stops whenever a deal is running. Firms that split the two jobs hit a second problem: how to reward the origination when an owner takes two or three years to come to market, and who is rewarded for preparing the company in between. So the preparation is done late or not at all, and the findings surface during exclusivity, when they cost the most.
Two seats, one evidence file.
Origination keeps running while a deal is in execution, and preparation starts before the sale.
Turn overWhat changes for you
On a Capital Row desk, origination is its own seat. The advisor who builds the relationship with an owner keeps the credit for it, however long the owner takes to come to market, and preparing the company is its own engagement. Relationships keep building while deals run, and the findings that usually surface in week six of exclusivity are on the record before the name reaches you. You price against them instead of renegotiating after them.
Or read the cases: Dead Deal Notes, ten public deals and why each one ended.
Seventy-five signed letters, and the reason each one died.
A license, a contract, a compliance gap, a customer concentration. 19.1 percent in 2023 and 21.5 percent in 2024.
Adjusted earnings that did not survive the source documents. 10.6 percent in 2023: the share doubled in two years.
The finding did not kill the deal. The argument about the price after it did.
The owner withdrew under exclusivity, for reasons the study records as the seller’s own.
The buyer could not fund the deal. 21.3 percent in 2023, so the share halved as rates settled.
The business fell short of its own numbers between the letter and the closing date.
Share of broken letters of intent in 2025, by reported cause, from a lower-middle-market deal platform’s study of seventy-five failed transactions, January 27, 2026. The categories are separate and are not summed here.
How long each buyer held the letter before it died.
Average days under exclusivity before the letter died. The shortest of any buyer type.
One company, one chance, and the clock running on the searcher’s own capital.
Three and a half months of the seller’s attention, and of the buyer’s diligence invoices.
Longer than private equity: the sponsor raises the equity after the letter, and the raise takes time.
Average days under exclusivity before the letter broke, by buyer type, from the same study. By industry: technology 94 days, business services 108.
The finding that diligence missed becomes the claim.
Share of all breach-of-representation claims against private sellers, up from 11 percent two years earlier. The longest to resolve, at a median of fourteen months.
Of private-target deals with a purchase price adjustment mechanism, the share where an adjustment occurred. 93 percent of deals have the mechanism.
Share of undisclosed-liability claims that were litigated or arbitrated, against 3.7 percent for claims of every kind.
The most frequent category of claim notified under representations and warranties insurance in 2025, ahead of material contracts, financial statements and tax at more than 10 percent each.
Nearly half of what ends a signed deal was in the records before the letter.
What the two studies are
The first is a lower-middle-market deal platform’s report on seventy-five of its own transactions that reached a signed letter of intent in 2025 and did not close, across eight buyer types and eight industries, with the reason each buyer or advisor reported. The percentages are separate categories of a single list, so they can be read together: nearly half of the broken letters ended on something diligence found, in the earnings or outside them, and a further seventh ended on the renegotiation that followed a finding.
The second is a study of what happens after closing: the claims buyers make against the escrow when a representation turns out to have been wrong. A claim for an undisclosed liability is a finding that diligence missed. Its share of all claims doubled in two years, it takes longer to resolve than any other kind, and it is three times as likely to end in front of a judge or an arbitrator.
The valuation gap, before any of this
Deals that never reach a letter die on price. In the 2024 Pepperdine survey of investment bankers, a valuation gap was the reason 49 percent of their engagements did not close, and two thirds of those gaps were between 11 and 30 percent of the price. In the 2026 lower-middle-market outlook, valuation expectations were the leading cause of failed deals at 28.3 percent, with diligence findings second at 24.5 percent. An owner’s number and a buyer’s number are built from the same records; the gap between them is what the records support and what they do not.
What the findings have in common
A license that does not transfer. A contract with a change-of-control clause nobody read. A customer that is 30 percent of revenue. An add-back with no document behind it. Revenue recognized when the cash arrived rather than when it was earned. None of these is hidden. Each is in a document the company already holds, and each is found in the sixth week of exclusivity by a buyer’s team that is paid to find it. The difference between a deal that closes and one that does not is often only who read the document first.
For a buyer, that is the case for having the evidence on a target assembled before the letter is priced, so that the price already reflects the findings. For an owner, it is the case for reading the records the way a buyer will, while there is still time to fix what they show. The public record of signed deals that died, with the court opinions and filings behind each one, is in the Dead Deal Notes.
- A lower-middle-market deal platform, Dead Deal Report: Unpacking 2025’s Broken LOIs, January 27, 2026, seventy-five failed transactions
- SRS Acquiom, 2024 M&A Claims Insights, 2025 info sheet, undisclosed-liability claims, deals with escrows released Q3 2022 to Q2 2024
- Goodwin, Undisclosed liability claims have doubled, September 30, 2025
- SRS Acquiom, 2026 M&A Deal Terms Study, as summarized in the July 2026 newsletter, 2,300 private-target deals, 2020 to 2025, purchase price adjustments
- Business Insurance, Transactional risk claims rise: Aon report, June 3, 2026
- Pepperdine Private Capital Markets Report 2024, investment banker survey, n = 69
- A lower-middle-market deal platform, 2026 Lower Middle Market M&A Outlook, March 24, 2026, 107 participants
Find it before the letter is signed.
Whichever side of the table you sit on.
For a buyer, the evidence on a target assembled before the letter is priced. For an owner, the records read the way a buyer will, while there is still time to fix what they show.
Read by a person.