Reportedly, roughly 40-50% of Shark Tank deals made on camera never actually close. A 2016 Forbes analysis found that 73% of deals from the show’s first seven seasons either fell apart or were renegotiated after filming—only 27% closed on the original terms.
The reason is simple: the real work begins after the terms of the deal are “agreed upon.” For those of us in who lawyer in the M&A world, none of this is surprising. That on-air handshake is the equivalent of a Letter of Intent (“LOI”) – a preliminary agreement that outlines key deal terms but is largely non-binding.
While it signals serious intent and can put significant guardrails on a transaction and its terms, an LOI is not the finish line. Most of its provisions (including price and structure) are subject to change based on what the buyer uncovers during diligence. Only a handful of terms – such as exclusivity, confidentiality, and expense allocation are typically binding.
Signing an LOI means you’ve agreed you are both in the same ball park. You’ve negotiated the right to proceed – not the right to close.
What Goes Wrong in the Tank (and in Your Deal)?
Shark Barbara Corcoran has noted that due diligence often uncovers misrepresented sales revenues or unclear ownership of key assets like patents – the same issues that plague M&A transactions of every size. Consider a few real examples:
- Former Shark Mark Cuban:
- $1.25 million deal with HyConn collapsed after Cuban’s team claimed to have discovered that the founder had exaggerated sales figures and wanted to pivot the entire business model.
- Deal with Foot Fairy supposedly fell apart when critical technical problems emerged: the app had inaccurate measurements and a fata bug that made it impossible to track sales or earn commissions—the company’s only revenue stream.
- Shark Lori Greiner’s team pulled out of the Biem butter sprayer deal when due diligence revealed the product didn’t actually have a reliably functioning prototype.
These aren’t exotic scenarios. They map directly onto common M&A deal killers:
- Financial discrepancies are the number one deal killer. In real world transactions, inconsistent or unsupported financials are one of the fastest ways to lose buyer confidence.
- Intellectual property gaps are equally dangerous. Products that appear promising on the surface may unravel if ownership isn’t clear. The same is true in M&A deals – if key IP has not been properly assigned (e.g. by founders, employees or contractors), buyers may walk or demand significant concessions.
- Disorganized due diligence sends a strong signal. If a seller is scrambling to find old contracts or corporate minutes, the buyer wonders what else is missing and where other shortcuts have been taken. Good corporate record keeping since inception and well-prepared sellers help reduce friction and maintain deal momentum.
- Missing third-party consents from landlords, vendors, or customers with change-of-control clauses can derail an entire transaction.
The Lesson for Entrepreneurs
Although it appears a majority of the deals on Shark Tank never close, there are still 1,030 companies that presented and are still in business. These companies didn’t let diligence issues “tank” the deal.
The lesson for entrepreneurs contemplating a transaction – whether it’s raising a Series A, taking on a strategic partner, or selling the company – is clear:
- Prepare early. Begin diligence preparation before signing an LOI;
- Organize your records. Maintain clean financials, corporate documents and contracts:
- Confirm ownership. Ensure intellectual property and key assets are properly assigned:
- Review key agreements. Identify change-of-control provisions and consent requirements; and
- Build a data room. Present information in a structured, accessible format.
These steps do more than streamline the process – they build trust and reduce the likelihood of deal fatigue. Experienced counsel can help sellers anticipate diligence issues early and avoid surprises that derail transactions.
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