I'd consider contraction, but make sure people don't know anyone remotely interested in taking over a team? Obviously you can find people out here int he forums, and if it's a local league, you can aim for local people, but it's not quite the same. I will address the how to do it, after we cover the elephant in the room, that traded pick.
If you make the pick vanish for nothing, you deserve to have a 3rd team leave your league, in any way they see fit. You need to think this part through first, so you can then figure out what else to do with the rest of the moving parts. Making it vanish is voiding some portion of a trade but not the whole thing, and that is an awful idea. This isn't an instance where the league goes belly-up, so since the league is there, the pick should be as well.
If you choose to reboot the league from scratch, then making it go away is okay, as you are essentially a new league.
We had a 3 new GM's taking over 3 vacant teams thing in my main league in sig, and our commish decided to do a draft for the new teams from players on the old teams. It worked well, and people not in the draft showed up online to watch it.
I've been in probably 4-5 leagues that have had contraction in the last 35 years. Some were sim leagues, and Strat-O-Matic or Statis Pro work differently than thpical fantasy, which works differently than a computer-based league.
Simple options are:
1. They get the pick in the order the other team would've been picking, or a supplemental 1st round pick at the end of the regular order.
2. They get an extra first round pick from a contraction draft. If you are doing a contraction draft, I would recommend against doing it with just a subset of teams. If you do that, then you run into the problem of where to draw the line for participation in said draft.
3. You could give them an extra keeper spot instead, but I think that's worse.
What I'd probably do is see if the league would prefer a contraction draft or to just make the players free agents. Figure out proposed draft paramaters first, so if that's the way it comes back, you're not winging it. From there, you can decide how to handle the pick, and present options. Some people like drafting a lot, and would prefer that.