How to Terminate a Deal

July 10, 2024

by a searcher from University of Illinois at Urbana-Champaign in St. Louis, MO, USA

I'm under LOI (nonbinding) with a seller and we have been in due diligence for the past couple months. I've uncovered some risk factors that make the deal no longer viable. I've developed a good relationship with the broker and seller, so I want to make sure I approach this correctly.

1. What is the best vehicle for breaking the news? Should I have this conversation over the phone with both the broker and seller? Should I notify only the broker first so he can tell the seller?

2. What comes next? Any paperwork we need to put together to acknowledge the termination of the deal? We have not signed the APA

Reply by a searcher
from London Metropolitan University in Kuala Lumpur, Federal Territory of Kuala Lumpur, Malaysia

The seller has given you his consent to conduct your due diligence. Accordingly you owe it to him by directly surfacing the issues you have discovered and conveying your decision to terminate on that basis. This calls for integrity on your part and respect to the Seller. I don’t see why you need hide behind the broker or an email especially when you have developed a good working relationship. Knowing how to handle emotions is also part of the process. So don’t run away from difficult conversations. You will also learn more about yourself in the process. Good luck!

Reply by a professional
from University of Michigan in Detroit, MI, USA

No black and white rule. I would start with a phone call and follow up by confirming in writing. I echo Jared's comment, reach out to the broker and seller if you're looking to keep the relationship going. Otherwise, I would let the broker know and leave it at that. If you've struggled with the broker and the seller, an email on its own will suffice too.

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