Selling your business is one of the most significant financial and emotional decisions you'll ever make. While it’s natural to feel excited when an offer comes in, not every deal is worth pursuing. In the world of mergers and acquisitions, a well-structured deal can secure your financial future—but a poorly constructed or risky offer can create long-term complications, legal exposure, and value loss.

Recognizing red flags early can save you from wasted time, costly legal disputes, or the regret of handing your business to the wrong buyer. Here are key warning signs that it might be time to walk away from an M&A offer.

1. Lack of Financial Transparency: If a buyer is unwilling or slow to provide financial documentation, that’s a major red flag. Whether the buyer is private equity-backed or an individual investor, you need to evaluate their financial stability and funding capacity. A buyer who cannot provide verifiable proof of funds, financial statements, or a clear funding strategy may not be able to close the deal—or may resort to last-minute renegotiations.

2. Vague Deal Terms or Moving Goalposts: If you find that key terms in the Letter of Intent (LOI) keep shifting, or that the buyer is unclear about what they are offering, proceed with caution. A reputable buyer will be upfront about the deal structure, valuation method, payment terms, and any contingencies. Changing deal terms—especially late in the process—can be a strategy to exploit your time and emotional investment. If the LOI becomes a moving target, it may be time to walk.

3. Overly Aggressive Earnouts or Contingencies: Earnouts can be an effective tool for bridging valuation gaps, but overly complex or unrealistic earnout structures often shift too much risk back onto the seller. If a large portion of your payout depends on future performance metrics beyond your control, especially post-closing, it could reduce the true value of the sale.

4. Cultural Misalignment or Vision Mismatch: In many cases, especially with founder-led or closely held businesses, culture matters. If you’re staying on post-transaction—or if you care about what happens to your employees, clients, or legacy—it’s critical to ensure alignment. A buyer who dismisses your company’s culture or proposes drastic changes with little understanding of your business could cause post-closing turmoil.

5. Excessive or Unusual Demands During Due Diligence: Buyers are entitled to thorough due diligence, but the process should be focused and reasonable. Excessive data requests, repeated delays, or combative tactics may signal a lack of seriousness or a strategy to wear you down for a price reduction later. If the due diligence process becomes unnecessarily difficult, that’s often a preview of what’s to come.

6. Legal or Ethical Concerns: Trust your instincts. If you uncover questionable business practices, legal entanglements, or ethical concerns about the buyer or their leadership, don’t ignore them. Who you sell to reflects on your reputation and can affect your professional network going forward.

Before entering into any buy/sell agreement, Talley & Company can help you determine optimal deal pricing and structure to achieve your goals from an ROI and tax perspective, accounting for factors that include revenues, future opportunities and contracts, industry trends, and market share. Contact us today.