The move followed news that IBM had told Danka it was likely to terminate its contract with the division "at any time".
Schroder Ventures, an affiliate of Schroders, the investment bank, agreed to buy 90 per cent of Danka Services International in March for pounds 300m.
Danka's chief executive Larry Switzer yesterday said IBM had told Danka on Monday "that `there is a distinct possibility the IBM may exercise its right to terminate' its agreement with DSI `and that this action may occur at any time'."
Mr Switzer added: "As a result of this notice, and after discussions with IBM, Schroder Ventures informed us that Schroder Ventures and its lenders declined to close the transaction."
Because of the failure of the accord, "the previously announced amendment to the credit agreement will not be effective," he added.
Further details about the IBM termination rights were not immediately available.