Customer Concentration Risk in an Acquisition

A profitable business can be fragile when too much revenue depends on a small number of customers.

Measure concentration

Calculate the share of revenue from the largest customers and inspect how that has changed.

Term, renewal, pricing and change-of-control provisions can affect durability.

Where appropriate and permitted, major-customer reference work can test relationship strength.

If one departure materially changes earnings, valuation and deal terms should reflect that risk.

Use live listings as market evidence, then verify each deal independently.

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