Assess whether related-party sales should be backed out of valuation

SITUATION Carve-out separation lead in a roll-up of three regional service companies has one working extract — customer concentration and termination-for-convenience clauses — after a peg set at a seasonal high. If customer concentration and termination-for-convenience clauses cannot support related-party sales should be, the only defensible M&A Due Diligence output is hold.

DECISION Carve-out separation lead in a roll-up of three regional service companies must choose Proceed / Reprice / Walk / Hold using customer concentration and termination-for-convenience clauses after a peg set at a seasonal high.

HYPOTHESES TO TEST 1. Customer concentration and termination-for-convenience clauses reads as Proceed once a peg set at a seasonal high is lined up to the same M&A Due Diligence population. 2. Customer concentration and termination-for-convenience clauses is closer to Reprice after a peg set at a seasonal high; Proceed would over-claim this Earnings and Revenue Quality extract. 3. Walk is still live in customer concentration and termination-for-convenience clauses for carve-out separation lead in a roll-up of three regional service companies. 4. Customer concentration and termination-for-convenience clauses is missing the fact carve-out separation lead needs after a peg set at a seasonal high; stop this M&A Due Diligence close.

ANALYSIS REQUIRED 1. Separate a one-off add-back from a recurring earnings issue in customer concentration and termination-for-convenience clauses. 2. Map reps, earnout mechanics, and integration risk a roll-up of three regional service companies would inherit. 3. Tie quality-of-earnings, working-capital, and contingent items in customer concentration and termination-for-convenience clauses to related-party sales should be. 4. For this M&A Due Diligence Earnings and Revenue Quality file, read customer concentration and termination-for-convenience clauses against a peg set at a seasonal high and write the one fact that would move related-party sales should be for carve-out separation lead.

RECOMMENDATION Choose Proceed / Reprice / Walk / Hold on this M&A Due Diligence / Earnings and Revenue Quality packet (customer concentration and termination-for-convenience clauses after a peg set at a seasonal high). Lead with the M&A Due Diligence option customer concentration and termination-for-convenience clauses can support after a peg set at a seasonal high, then the two facts that force it, then the Monday action for carve-out separation lead in a roll-up of three regional service companies.

COMMAND RETURNS - Bottom-line M&A Due Diligence option on related-party sales should be, then the evidence in customer concentration and termination-for-convenience clauses, then the action for carve-out separation lead - Hypothesis scorecard against customer concentration and termination-for-convenience clauses: supported / rejected / untestable - Missing page in customer concentration and termination-for-convenience clauses after a peg set at a seasonal high, if any - Regulatory or exam hook Earnings and Revenue Quality would cite