The handshake has happened. The heads of agreement is signed. Everyone is moving toward settlement. And then the deal falls apart. It happens more often than most sellers expect — and the reasons are almost always predictable in hindsight.
Understanding why Australian business sales collapse after agreement is the most useful preparation a seller can do. Most of these failure modes are preventable. The ones that are not can at least be anticipated.
1. Due diligence reveals what the seller did not disclose
This is the most common reason deals collapse. The buyer's accountant or solicitor finds something during due diligence that was not disclosed — or was disclosed in a way that understated the significance. A lease that expires sooner than stated. A key customer who has already indicated they will not stay. A workers compensation claim that is still open. An ATO debt that was not mentioned.
The solution is simple: disclose everything before the buyer signs the heads of agreement. A buyer who discovers a problem during due diligence feels deceived, even if the omission was unintentional. A buyer who is told about a problem upfront can price it in and move forward. Transparency before agreement is always better than discovery during due diligence.
2. Finance falls through
Many buyers enter a heads of agreement subject to finance approval. If the bank declines the loan — because the business does not meet their lending criteria, because the buyer's personal financial position is weaker than expected, or because the sector is one banks are cautious about — the deal collapses through no fault of the seller.
The best protection against this is qualifying buyers thoroughly before they sign a heads of agreement. A buyer who has spoken to their bank, has a clear understanding of their borrowing capacity, and has a realistic plan for financing the purchase is far less likely to have their finance fall through than one who has not done that groundwork.
3. The lease cannot be assigned
In NSW, lease assignment requires landlord consent. Landlords are not obligated to consent, and some use the change of ownership as an opportunity to renegotiate terms — higher rent, shorter term, or personal guarantees from the new owner. If the landlord refuses to consent to the assignment, or imposes conditions the buyer will not accept, the deal collapses.
This risk is particularly acute for businesses in desirable locations where the landlord knows the premises are in demand. The solution is to engage the landlord early — before the heads of agreement is signed — and get a clear indication of their position on assignment.
4. A key employee leaves during the sale process
Business sales are confidential for a reason. If staff find out the business is for sale — through a leak, through a buyer who talks too much, or through the seller's own disclosure — key employees may start looking for other jobs. Losing a key employee during the sale process can materially affect the business's value and give the buyer grounds to renegotiate or withdraw.
5. The buyer gets cold feet
Some buyers sign a heads of agreement before they are truly ready to commit. As due diligence progresses and the reality of the purchase becomes clearer — the complexity of the operations, the personal guarantees required, the working capital needed — they find reasons to walk away. This is harder to prevent, but thorough buyer qualification before the heads of agreement reduces the risk.
6. The business deteriorates during the sale process
A business that shows declining revenue or operational problems during the sale period gives buyers grounds to renegotiate. Buyers will compare the business's performance during due diligence to the financials they were shown at the start of the process. If there is a meaningful gap, expect a price reduction request — or a withdrawal.
The most important thing a seller can do during a sale process is keep running the business. Your broker handles the sale. Your job is to make sure the business continues to perform.
