The Other Deal That Died in 2025

We are disciplined and we will walk.

That is not something I put on a pitch deck. It is not a line I use to sound credible in LP meetings. It is the actual operating principle behind every deal I evaluate, and the one I paid the most to prove in 2025.

This is the story of the other deal that died last year.

What It Looked Like on Paper

The business was an integrated pipe fitting company. When we first engaged, the seller was presenting $12 million in EBITDA. That is a real business. Real cash flow. Real margin. In the lower middle market, a business at that size and profitability profile opens a lot of doors, attracts serious capital, and commands a multiple that makes the math work for everyone at the table.

We came in through a deal sourcer, went through the initial conversations, and saw enough to get interested. The business was in a defensible niche. The end markets were stable. The customer relationships looked durable. On the surface, it was exactly the kind of asset I spend my time looking for.

We moved forward. That was the first decision. Looking back, it was not the wrong decision based on what we knew at the time. But what we did not know was about to start revealing itself, slowly and expensively, over the next six months.

Why We Went Pre-Close

We staffed a team at the business before closing. That is not standard practice for every deal, and it is not something you do unless the situation calls for it. In this case, it called for it.

The financial reporting at the company was on a quarterly close cycle and built around percentage of completion accounting. For anyone who has not spent time inside a business using POC accounting, the short version is this: it requires significant judgment at every reporting period to determine how much revenue to recognize and when. Done well, it produces an accurate picture of the business. Done poorly, or done without real discipline, it produces a picture that can diverge from economic reality in ways that are very hard to see from the outside.

We brought in accountants. We brought in a finance team. We stood up thirteen-week cash flow projections. We built the infrastructure to understand what was actually happening in the business, not just what the historical financials said had happened.

What we found was a gap. And the gap kept getting wider.

The Slow Bleed

The numbers did not collapse all at once. That would have been easier. A single event, a clear break, a number that was obviously wrong. Instead, what we experienced was a slow bleed of adjustments. The projections that had informed the $12 million EBITDA story started getting soft. The line items that had looked solid started requiring re-examination. The gap between what had been represented and what the cash flow projections were showing widened over weeks, then months.

By the time we had a clear view of what the business was actually generating, we were looking at something closer to $4 million in real cash flow. Not $12 million. The story that had gotten us to the table, the story that had justified the team and the time and the capital we were spending, was not the business we were actually inside.

We had spent somewhere between $175,000 and $225,000 building the picture. We had hired a finance professional specifically for this engagement and ultimately had to let him go when it became clear the deal was not going to get done. That number does not include the internal time, the opportunity cost, or the months that could have been spent on something else.

The Counterparties

Part of what made this situation harder than it needed to be was the quality of the counterparties.

The deal sourcer was not a reliable partner through the process. The executive team, rather than staying focused on the business and supporting a clean transition, was distracted. The people who should have been working the problem with us were not fully in the room. When you are already dealing with financial complexity and a founder situation that has gone sideways, you need the parties around the table to be engaged and honest. That was not what we had.

I have thought about this since. Deal sourcing relationships carry more weight than buyers sometimes give them credit for. The sourcer sets the tone. They shape the first impression of the business and the seller. They influence what information gets shared and when. When the sourcer is not a reliable partner, the entire information environment of the deal gets distorted. That distortion is expensive to correct and sometimes impossible to correct completely.

The Founder Problem

The founder was going through a divorce.

I am not going to get into the details of a personal situation that belongs to someone else. What I will say is that when a founder is going through a significant personal disruption at the same time they are trying to sell their business, the business absorbs the consequences. In this case, the consequences were significant.

The business had become, in practical terms, a personal financial vehicle. Expenses that had no business purpose. A line of credit that had been drawn against for non-operational reasons. The personal and the professional had blurred in ways that took real work to untangle, and some of it we were never fully able to untangle.

The founder was also the key sales leader. The business's ability to generate revenue was not cleanly separable from this one person's presence and relationships. That is a structural problem even under normal circumstances. In circumstances where the founder is managing the business from the hip rather than from a plan, it becomes a different order of risk entirely.

A business is only as stable as its leadership. When leadership is unstable, the business absorbs that instability in ways that compound over time.

The Decision

We walked.

The deal was not going to get done. That had become clear. The gap between what had been represented and what was real was too wide to bridge with structure. The counterparties were not the partners we needed them to be. The founder situation was not resolving in a direction that made the investment viable. And we were burning cash against a timeline with no credible path to close.

The decision to walk is always a calculation. You have sunk costs. You have real costs. You have time and capital that you know you are not getting back. None of that should factor into the decision, and I am disciplined about keeping it out of the calculus. The question is never what it cost to get here. The question is whether the deal, as it currently exists, makes sense to own.

This one did not.

What Changed

I lead due diligence personally now.

That is not about distrust of teams or advisors. Teams and advisors are essential and I will always use them. It is about accountability. When I am personally in the room, personally looking at the numbers, personally asking the questions, I catch things earlier. I form my own read on the management team and the founder before that read gets filtered through anyone else's interpretation.

The other thing I changed is thresholds. I set explicit triggers at the start of every process now. If the financial picture moves by more than a defined amount, we stop and reassess before going further. If the management team demonstrates a specific set of behaviors, we stop. If the information environment starts to feel distorted, we stop. Not because the deal is necessarily dead at that point, but because continuing past a threshold without conscious reassessment is how you end up six months in and $200,000 lighter on a deal that was never going to close.

The threshold is not about being pessimistic. It is about being honest with yourself before the momentum of the deal makes honesty expensive.

The Practice of Discipline

Walking from a deal is not a failure. It is the job. Every deal that dies in diligence is a deal that did not destroy capital post-close. The discipline that kills bad deals before they close is the same discipline that protects returns on the deals that do.

I spend a lot of time talking to capital partners about the deals I have done. The returns, the theses, the operating plans that worked and the ones that needed adjusting. What I try to be equally clear about are the deals I did not do and why. The pipeline in this business is wide. The conversion rate is low. That is by design. The goal is not to close everything that gets to diligence. The goal is to close the things worth closing and kill everything else as quickly and cheaply as possible.

We are disciplined and we will walk.

That cost me something real in 2025. It was still the right call.

Paul W. Swaney III is the founder of Swaney Group Capital, a fundless sponsor focused on acquiring and operating lower middle market businesses. LeverUp® publishes at least weekly. More if I have something extra to say.