The 5 Legal Loose Ends That Kill Deals (And How To Tie Them Up Now)

Every business owner who has been through an M&A transaction will tell you the same thing: the issues that slowed or killed the deal were almost never the obvious ones. They were not the major lawsuit or the obvious regulatory problem. They were the quiet, overlooked administrative and legal loose ends that had been sitting dormant for years, suddenly thrust under the bright light of buyer due diligence. The good news is that most of these issues are entirely fixable—but only if you identify them before a buyer does.

1. Contracts That Were Never Signed

A surprising number of businesses operate on handshake agreements or on the basis of purchase orders and invoices alone. When a buyer’s attorney requests copies of your material customer and vendor contracts and you can only produce emails or informal arrangements, it raises serious questions about your legal position in those relationships and whether those relationships are even transferable. Audit your key commercial relationships and get them documented in properly executed agreements now.

2. Intellectual Property Not Formally Assigned to the Company

If your business was built on software, a brand, a process, or other creative work developed by founders, early employees, or independent contractors, there is a meaningful chance that the intellectual property was never formally assigned to the company. Without written IP assignment agreements, the individuals who created the IP may have retained ownership—even if they were paid for their work. This is one of the most common and costly surprises in technology and services company due diligence.

3. Equity Agreements That Were Never Papered

Informal promises of equity to employees, advisors, or early contributors—never reduced to a written agreement—can be landmines in an M&A context. If someone believes they were promised equity and you disagree, you have a dispute that needs to be resolved before or during the transaction, which is the worst possible time. Review your cap table, formalize any outstanding equity commitments, and ensure that every equity grant has been properly documented and approved.

4. Expired or Missing Licenses and Permits

Regulated industries—healthcare, financial services, food and beverage, construction, and many others—require specific licenses or permits to operate legally. Buyers routinely check whether the target company holds all required licenses, whether they are in good standing, and whether they are transferable upon a change of ownership. Discovering mid-deal that a critical license lapsed or was never obtained can delay or derail a transaction. Conduct a full license audit and rectify any gaps before you engage a buyer.

5. Personal Guarantees and Cross-Collateralization

Many small and mid-sized business owners have signed personal guarantees on business loans, leases, or vendor agreements without keeping a clear record of them. In an asset sale or certain stock sale structures, those obligations do not automatically transfer to the buyer—and buyers will require you to obtain releases from lenders or landlords as a condition of closing. Identifying and addressing these obligations early, rather than during the due diligence crunch, keeps the deal timeline on track.

None of these issues require a crisis to fix. They require attention, an honest audit of your legal infrastructure, and a willingness to address what you find. Working with counsel now—well before you are ready to sell—is the smartest investment you can make in the future value of your business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.