In the UK mid-market, broadly defined here as lot sizes of c. £1–10 million, most transactions do not fail because the asset is fundamentally “bad” (at least in our experience!) in such a way that the deal is unsalvageable. Assets are not typically “fundamentally flawed”, nor do transactions usually fall over due to a single dramatic discovery late in the process.

Instead, deals tend to break because they were never sufficiently structurally robust to begin with.

For investors operating in the mid-market, execution risk has become as material as pricing risk. Capital is scarcer, debt is more conditional, and time has an increasing cost. A transaction that fails after three months of professional time, fees and opportunity cost may look like a near-miss – but in economic terms, it represents a complete loss.

Understanding why deals fail is not simply an exercise in post-mortem analysis (although such exercises are always very useful) – it is of deriving practical and applicable experience. A deal that does not complete delivers an IRR of less than zero, regardless of how compelling the spreadsheet once looked – but, you can learn from it. Mistakes happen – but, they are only truly systemic issues if the same mistake happens twice.

What follows is a Manston-subjective examination of some of the most common failure points in mid-market UK real estate transactions, ordered not by drama, but by frequency and impact.

1. The Financing That Was “Basically Agreed”

By far the most common cause of failure that we come across, or hear about, is debt that exists ‘in principle’ but not in fact.

At heads of terms stage, buyers often proceed on the basis of indicative lender appetite: leverage ranges, coverage rations, margin expectations, and informal comfort around asset class. The problem is not that these discussions take place (they must, unless one is a purely cash acquiror) it is that they are frequently treated as settled after an initial ‘yes, we’ll support that’ from the bank, when in reality they are conditional on more detailed modelling and credit committee scrutiny that has not yet occurred.

Deals can easily unravel when one or more of the following emerges late in the process:

• The lender applies a different interpretation of income durability than the buyer
• A previously assumed WAULT or covenant strength proves insufficient
• A refinancing assumption underpins the credit logic

In a higher-rate environment, lenders have less tolerance for ambiguity. If debt is marginal, it is not merely repriced, it is often withdrawn. When that happens late, equity rarely steps in quickly enough to save the transaction (even assuming such equity can be found at all!)

In practical terms – this definitely has an impact on the ‘curb appeal’ of the acquiror. It is often said that a bird in the hand is worth two in the bush – and buyers genuinely prefer cash deals to those dependent on raising new debt.

Certainly at Manston we have sold assets to a marginally lower bidder who could show cash-at-bank, than to a higher one who was required to raise new debt (on either the asset in question, or other assets). Money is important – but without deliverability, what are you left with?

2. Lease or Tenant Complexity Misunderstood at Outset

Mid-market assets frequently carry bespoke lease structures: side letters, historic variations, undocumented concessions, or non-standard rent review mechanics. These are not inherently problematic, but they are often insufficiently interrogated at the initial pricing stage.

The failure mode here is more subtle. The buyer does not miss the issue; rather, they underestimate its downstream effects:

• A break clause that is improperly understood as to conditionality
• An indexation clause that is capped, floored, collared or asymmetrically drafted.
• We have lost count of the number of indexation clauses that we have reviewed that are simply mathematically wrong and would result in no uplift at all at review dates!
• A tenant covenant that looks strong in isolation but weakens materially under group analysis.
• Head lease conditions if acquiring a long leasehold interest – do we have to consider service charges, restrictions on activity, AGAs?

How easy is it going to be to insure for an incoming tenant? We have had one potentially very large deal progress far too far (with consequent investment of time, money and energy) before being advised by our insurers that for a tenant of the proposed sector – the insurance premium would likely be 5x that what it was under another tenant.

By the time legal and professional diligence surfaces these points in full, they can materially alter valuation, lender appetite, or both. Renegotiation follows (or is at least attempted), momentum slows, and confidence drains from the process.

Clearly one cannot undertake a full DD process ahead of making an initial offer – but one needs to identify clearly the areas that will be focussed upon in a DD process when making the offer. If there are areas that you are unable to ‘scope out’ initially, and they are likely to be problems: highlight these to the seller as conditions of your offer – manage their expectations, don’t drop problems on them from a great height.

3. Price Precarity Masquerading as Certainty

Another frequent deal-breaker is what might be described as false conviction.

At offer stage, buyers often submit pricing that reflects an internally optimised case: full debt terms, stable income, and benign exit conditions. That price may be entirely rational—but only within a narrow tolerance band. When diligence introduces even modest uncertainty, the economics are no longer clear.

This is where deals oft fail: with ‘drift’ rather than confrontation.

The seller senses hesitation. The buyer seeks “just a little” re-negotiation. Trust erodes rapidly. Neither party is necessarily wrong, but the original price lacked resilience to deviation. In mid-market transactions, where bid depth is often thinner, this dynamic is particularly corrosive.

Yes – you may lose out on some opportunities if you can’t match your opponent’s optimism – but if she can’t deliver on that optimism, she won’t complete the deal. And you’ll still be waiting (possibly!) ready to pick the deal up as a ‘safe pair of hands’.

Long-term success isn’t about optimistic offers that have to be pared back, nor pessimistic offers to protect from all possible risk – it is about resilient & deliverable offers.

Worse than missing out on one deal because your modelled price was too low is getting a reputation as a ‘time waster’ in the market and losing out on many subsequent deals.

4. Legal Friction and the Cost of Time

Legal issues rarely kill deals outright in and of themselves. Delay does, though.

Rights of way, access arrangements, historic covenants, title anomalies—these are commonplace in mid-market assets, particularly outside prime cores. Individually, they are manageable if properly communicated and identified. Collectively, however, they introduce uncertainty and, critically, an increase in deal time.

Time interacts with everything else:

• Debt offers expire
• Investors reassess priorities
• Sellers lose patience or explore alternatives
• Buyers find alternative investments

A deal may still be viable in theory, but in practice the window does close.

5. Obsolescence Risk Surfacing Too Late

Environmental and technical considerations are increasingly binary. Assets either sit within acceptable parameters, or they do not – and it isn’t (thematically, if not practically) possible to price these binary failures into a deal.

Transactions falter when buyers realise late that:

• EPC trajectories constrain leasing or exit options. Just how easy is it to change that D to an A?
• Power capacity or structural limitations limits tenant demand. Over-spec in a unit might look great to the seller in a sale & leaseback – but what about to the rest of the market, and what they want?
• Compliance risk cannot be clearly priced or mitigated

At that point, the issue is no longer purely one of incremental capex (fundamentally altering your returns from those initially priced in). It is thesis-level risk. Buyers walk away not because the problem is insoluble, but because it no longer fits their original investment logic.

Hit these issues head on! At Manston we instruct a building survey to be undertaken as soon after our initial offer is accepted as possible (having clearly marked the offer as subject to such) – don’t store potential problems up and waste money on other elements of the deal only to realise a month down the line that actually the roof is made from blue asbestos and greater-crested newt entrails.

6. Misreading Seller Motivation & Drivers

Mid-market sellers are often individuals, families or closely held vehicles. Their motivations are rarely uniform – but can be key to understanding the ‘why’ of a deal from their perspective.

Tax timing, refinancing pressure, succession planning, or reputational sensitivity frequently sit behind the nominal asking price. Deals break when buyers misinterpret this context – assuming flexibility where none exists, or failing to explore structural solutions where price appears rigid.

When misalignment becomes apparent late, negotiation hardens rather than evolves naturally to solve the deal ‘in the round’.

Price is ‘a’ lever, not ‘the’ lever.

7. Transaction Fatigue

Finally, there is a practical reality that receives little attention: exhaustion. Ask anyone who has been in commercial property for more than 5 minutes and they will know deal fatigue of old.

Mid-market transactions are typically run by small teams wearing multiple hats. When a deal becomes protracted, focus drifts. Minor issues become reasons to stop rather than problems to solve. Professional energy dissipates, sunk cost fallacy becomes apparent and other opportunities arise.

Many deals do not collapse with a bang: they simply fade out.

The Real Issue: Fragility

What unites these failure points is not incompetence or bad faith – it is fragility.

Deals break when their economics, structure or assumptions cannot absorb (inevitable!) deal friction. In the current environment, the most successful investors are not those chasing the highest projected returns, but those structuring transactions that are hard to break and who are consistently delivering.

Execution discipline is not just a hygiene factor – it is increasingly a significant a source of competitive advantage.

Understanding what actually breaks deals—and designing around those risks—is now central to consistent & prudent capital deployment.

When structuring deals and planning an investment strategy – be willing to be inventive. Be willing to lose 9 out of every 10 opportunities you look at.