With all the pressure on the independent agency system for merger-and-acquisition (M&A) activity, due to aging principals, lack of new talent entering the business and the failure to implement succession plans on one end — and the growing appetite for agencies on the part of large brokers and public companies, hedge funds and banks on the other end, why aren't there more successful transactions?

Why do some deals disintegrate during the negotiation process or simply blow up almost at the point of closing, after so much wasted time, money and effort?

The number of M&A deals during the last few years has increased, but the supply and demand so apparent in the marketplace is not even close to reaching its potential.

Contributing factors to deal disintegration

What are the major factors that contribute to many deals not closing as the reality of the transaction looms? I decided to dig deeper beyond the traditional issues, like price, to find problems that can't be overcome. Here are just a few of the contributing factors:

• Lack of planning and preparation for the inevitable exit every business owner must face. An owner suddenly decides that it is time to sell or merge (pick one), starts talking with other owners he/she knows about exploring the possibility of getting together. Or, another option: Engaging a consultant, committing to a substantial engagement and success fee, and, without much homework on the owner's part, expecting the consultant to put it all together in a nice neat package.

• Not understanding the basic fundamentals of how deals are made and what options might be best, even before engaging a consultant's professional advice. And the very first fundamental to know is, what is the value of the business in the mind of the owner? How did they arrive at that value?

• Not paying attention to the difference between a stock deal vs. an asset sale and the tax implication of each transaction. Some owners don't know the differences between an LLC, a regular Corp or a Sub S Corp.

• Having no basic benchmark information to show the business' revenue growth, profitability per employee (spread), expenses per employee and other trends that measure the agency against industry peers and to itself. So many agency owners mean to do this, yet never get around to it.

• Not understanding in advance — beyond price — the terms and conditions, financials, tax implications, employment contracts, payment formulas such as earn-outs and potential claw-backs, and how these factors eventually determine the ultimate purchase price.

• Not having a crystal-clear vision of why you want to sell, merge or buy and not setting a specific deadline to make it happen.

• Not comprehending the importance of due diligence, and why ignoring or delaying this process will inevitably come back to bite you.

Related: Thinking of selling your agency? Here's what to do