The Premier League champions made a late move for the Portugal international on deadline day and though their offer was accepted by the Bernabeu chiefs, the paperwork needed to finish the deal was not completed before the transfer window closed.
Meanwhile, reports also suggest the move fell through because Madrid could not complete their move for Granada left-back Guilherme Siqueira, who was rumoured to have been lined up as Coentrao's replacement.
Coentrao moved Benfica from to Madrid in 2011 for a fee of €30m, plus defender Ezequiel Garay moving in the other direction as part of the deal. The player had been linked with a move to Tottenham all summer, as a potential makeweight in the deal that saw Spurs winger Gareth Bale move to the Spanish capital for a world record transfer fee.
Though they failed with the moves for Coentrao and Athletic Bilbao midfielder Ander Herrera, United were able to complete the transfer of Marouane Fellaini, who moved to Old Trafford from Everton, late in the day.
Meanwhile, United have allowed forward Bebe to leave on a season-long deal to Portuguese outfit Pacos de Ferreira.
The 23-year-old has managed to make just two Premier League appearances for the Red Devils, since he was brought in by Sir Alex Ferguson in 2010 for £7.4 m from Guimaraes. New United boss David Moyes also feels the player does not feature in his plans, allowing him to return to Portugual with Pacos.
Bebe have had loan spells at Besiktas and Rio Ave during the last two seasons but failed to impress during the time and earn a permanent move to either side.
United have also allowed midfielder Nick Powell to go out on a season-long loan, with the English prodigy moving to Championship side Wigan Athletic.
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