Assess whether a top customer is actually sticky from customer concentration

Situation

Earnings and Revenue Quality work in a strategic buyer looking at a carve-out from a conglomerate now turns on a top customer is actually sticky because an earnout based on 'adjusted EBITDA' with no dictionary put customer concentration and termination-for-convenience clauses in play. IP diligence counsel's financial counterpart should say what customer concentration and termination-for-convenience clauses proves.

Decision

IP diligence counsel's financial counterpart in a strategic buyer looking at a carve-out from a conglomerate must choose Proceed / Reprice / Walk / Hold using customer concentration and termination-for-convenience clauses after an earnout based on 'adjusted EBITDA' with no dictionary.

Hypotheses to test

• The population in customer concentration and termination-for-convenience clauses is the one an earnout based on 'adjusted EBITDA' with no dictionary named, so Proceed follows for this Earnings and Revenue Quality file.
• The population in customer concentration and termination-for-convenience clauses is adjacent only to an earnout based on 'adjusted EBITDA' with no dictionary; Reprice is the honest M&A Due Diligence call.
• A strategic buyer looking at a carve-out from a conglomerate already contained an earnout based on 'adjusted EBITDA' with no dictionary before customer concentration and termination-for-convenience clauses arrived; no new Earnings and Revenue Quality path.
• Provenance on customer concentration and termination-for-convenience clauses after an earnout based on 'adjusted EBITDA' with no dictionary is broken; do not pick Proceed or Reprice yet.

Analysis required

• Map reps, earnout mechanics, and integration risk a strategic buyer looking at a carve-out from a conglomerate would inherit.
• Tie quality-of-earnings, working-capital, and contingent items in customer concentration and termination-for-convenience clauses to a top customer is actually sticky.
• Name the document IP diligence counsel's financial counterpart still needs before signing.
• For this M&A Due Diligence Earnings and Revenue Quality file, read customer concentration and termination-for-convenience clauses against an earnout based on 'adjusted EBITDA' with no dictionary and write the one fact that would move a top customer is actually sticky for IP diligence counsel's financial counterpart.